Guar gum prices fall 13% as Covid halves demand

Guar gum prices have fallen 13% in the past month as the rise in Covid-19 cases has hit demand from the oil exploration sector in north America and China as well as food processing sector in Europe.

Prices have fallen to Rs 59 per kg from Rs 68 per kg in a month as demand halved, said Purushottam Kumar Hissaria, president of the Guar Gum Manufacturers' Association.

"Usually from September we start getting orders and contracts are signed, unlike this year. With the second wave of Corona we are all worried and more than 80% of the domestic mills continue to be closed, " he said.

Hissaria said demand had fallen as the number of oil rigs in USA had dropped to 150-200 from 700-800 a year ago. "Revival in demand will depend on the Democrats policy on environment and oil and gas exploration. Also, a reduction in number of Covid cases can increase offtake by the food sector, " Hissaria said.

The US accounts for 34% of India's guar gum exports. It uses the commodity in ‘fracking’ or hydraulic fracturing process to extract oil and gas from rocks.

Monthly guar gum demand in the mandis and export market has halved in the past year, said Ramesh Vohra, MD, Manidhari Guar Gum Industries in Bikaner. "On an average each month exports are close to 14,000-15, 000 tonne which is less by 50%. Even in the mandis everyone is buying as per their requirement. I don't expect a pick up in demand in near future, " he said.

"The U.S. oil industry was trying to recover from the worst demand shock in the history of oil markets. But many US shale companies filed for bankruptcy as unsustainably low oil prices this year weighed on already weakened balance sheets which will impact gum demand. Now technically as guar seed prices are trading well below Rs 4,200 per quintal of 100 kg each we may see prices testing Rs 3,800 per quintal while guar gum look weak and can touch Rs 5,500 per quintal soon,” said Ajay Kedia, director at Kedia advisory.