After hitting a six-year-low exports of guar gum in the rupee value terms rebounded in FY18 on renewed demand, especially from the US and Norway. Shipments of guar gum, which is used in fracking to extract shale gas, are likely to improve further on better price outlook for crude oil, analysts feel.
Exports have improved this season despite average monthly shipment prices staying higher by over Rs 900 per quintal at Rs 8,200 per quintal in FY18 against Rs 7,300 per quintal in FY17. Quoting the commerce ministry data, Angel Commodities Broking in its latest report pointed out that in 10 months (April-January) of FY18, the US imported more than 1,77,700 tonnes of guar gum from India against 1,31,133 tonnes last year.
According to the agricultural and processed food products export development authority (Apeda) data, guar gum exports in April-February of FY18 surged 24.3 per cent on-year to 450,000 tonnes against 362,000 tonnes during the same period last year. The study said guar gum exports increased by 0.7 per cent on-year in February to 44,081 tonnes. But exports increased on-month by 9.7 per cent despite rise in prices. In February, the average export price per quintal of guar gum increased by over Rs 1,100 to Rs 9,596 from Rs 8,438 in January, which is the highest in two years. The major guar gum export destinations are the US, Norway, Germany, Russia and China.
In rupee terms, shipments in April-February 2018 grew 39 per cent to Rs 3,713 crore over corresponding period last year’s Rs 2,666 crore. In dollar terms, shipments were up 45 per cent at $577 million (from $396 million). In volume terms, the shipments till February were up 7 per cent at 449,000 tonnes over 419,000 tonnes in 2016-17.
“Supply restriction from Opec members and Russia is likely to support crude oil prices in the coming months and may prove beneficial for oil drillers in the US. Exports are expected to improve further from April onwards as per the export seasonality index based on last 9 years’ guar gum export from India,” said Veeresh Hiremath, research head, Karvy Commodities Broking.
In the futures market, said market players raising of holdings by participants in tune with upbeat physical sentiments on the back of robust export demand, reflected up-trend in guar gum prices.
“Going forward, the guar seed May delivery contract on NCDEX is expected to improve in coming week and trade towards 4,310 (CMP: 4,120 per quintal) supported by increase in guar gum exports in April and May as the US is expected to increase its oil and shale gas drilling operations due to surge in crude oil prices. Moreover, it gets support from dip in arrivals in the physical market and strong physical demand from millers and stockists. But prices may correct further if the India meteorological department predicts normal monsoon for 2018,” said Ritesh Kumar Sahu (fundamental analyst – agri commodities), Angel Commodities Broking.
Guar complex futures have been trading on negative note in the last two months after touching its three-year high in January. In the last two months (February and March), guar seed futures plunged by 12.4 per cent from its higher levels in 2018 while guar gum slipped close to 15 per cent.
“Earlier in the season, when the guar seed harvesting started in October last year, prices of guar seed were Rs 3,500 per quintal, which surged over 35 per cent to Rs 4,730 per quintal in January. Prices have jumped on expectation of lower production due to less acreage in Rajasthan, decline in arrivals and improved export demand for guar gum. But guar futures didn’t sustain its positive momentum during February and March mainly due to technical corrections after continuous increase in prices for three successive months. This correction was due to increase in production estimates in Rajasthan and fear of decline in exports demand at higher prices,” said Sahu.