1 24 th Nov, 2013 Guar Scenario Mapping The Market Thought of Guar and Guargum markets Nagaraj Meda Managing Director TransGraph Consulting Pvt.Ltd 6 th.

1

24th Nov, 2013

Guar Scenario

Mapping The Market Thought of

Guar and Guargum markets

Nagaraj MedaManaging Director

TransGraph Consulting Pvt.Ltd

6th & 7th, Dec’2013Jaipur

http://en.wikipedia.org/wiki/File:Cluster_bean-guar-Cyamopsis_psoralioides-Cyamopsis_tetragonolobus-TAMIL_NADU73.jpg

© TransGraph Consulting Pvt Ltd Slide

Price drivers –review

2

Higher Natural Gas prices in US increased shale Gas Production and higher Guar Gum Exports from India

Good prices realization by Shale producers and increased buying Guar Gum for Shale Fracking

Increased cost to Shale Gas producers of gum and Started using Substitutes like Carboxy methyl Cellulose

Higher Guar seed Production in 2012-13

Expected Higher Ending stocks & higher Production

Demand analysis

3


Indian Guar Gum Exports Sector Wise

4

60%20%

15%

2%1% 2%

Oil drilling Food industry Paper&Textile

Pharmaceutical Cosmetics Others

Guar Gum in the International Markets

62%

28%

4%2%4%

Food Industry Paper & Textile Pharmaceutical

Cosmetics Others

Guar Gum usage in the Domestic Markets


Shale production: Chemical used per Fracking

5

Position ChemicalsQuantity Required per activity ( tons)

Acid Hydrochloride 4.25

Biocides Quaternary Ammonium Chloride 17Corrosion Inhibitor Methanol 4.25Friction Reduce Petroleum Distillate 4.25

Gelling Agent Guar Gum Or Carboxy Methyl Cellulose 42.5Oxygen Scavenger Boric Acid 4.25Cross Linker Sulfate 8.5

Source : Chevron & TG

Gelling AgentSupport gel formation, increase viscosity for proper down hole transportation of sand, ideal proppant carriage

Guar gum, hydroxyethylcellulose, ( Carboxy Methyle cellulose), Petroleum Distillate Ethylene Glycol


US Shale Production Trend (BCF)

6

2011 2012 2013e 2014p 2015p13500

14000

14500

15000

15500

16000

16500

17000

17500

18000

0%

5%

10%

15%

20%

25%

30%

14926

15896

1678317027

1734224.16%

6.49%5.58%

1.45% 1.85%

Production %Change

US Shale & Oil Production and % Change y/y

Source : EIA & TG


US Recoverable Gas Reserves (TCF)

7

20132015

20172019

20212023

20252027

20292031

20332035

20372039

20400.00

5.00

10.00

15.00

20.00

25.00

30.00

Shale gas

Tight gas

Coalbed methane

US Recoverable Shale Gas Reserves Up to 2040 ( In TCF)

US shale Gas reserves are near 26.5 trillion cubic feet and US may meet nearly 60% of its energy requirements from Shale.

Source : EIA & TG


Key Elements for Guar gum Demand

• To get a billion cubic feet of shale gas, an estimated 12 tons (approx.) of Gelling Agent will be used.

• To produce 17027 BCF of gas in 2014, US would require approx., 204325 tons of gelling agents.

• Guar gum imports in 2012 were 2,04,000 tons.

• By 2030, EIA estimates shale gas production in US to go to 26,000 BCF of gas resulting into 312000 lakh tons of gelling agents.

• Depending on price competitiveness there is an excellent scope for demand growth of Guar gum.

8


World Recoverable Shale Gas Reserves (TCF)

As per EIA Estimation shale gas will emerge as most important energy resource due to its cost competitiveness.

9

China

Argentina

Algeria US

Canad

a

Mexico

Australi

a

South Afric

aRussi

aBraz

ilIndia

0

200

400

600

800

1000

1200 1115

802707 665

573 545437 390

285 245

60

world Recoverable Shale Gas (TCF)Source : EIA


Indian Shale Prospect

• ONGC started first shale Fracking pilot project in Gujarat recently and if its get successful then they will drill nearly 30 wells in 2 years of time.

• It is expected that Shale gas production will increase post 2015, as currently Fracking process is expensive.

• Meanwhile, in India the shale Fracking could lead to water crisis as each well requires near 3 to 5 million liters of water.

• Demand from Indian shale industry is not very significant.

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Supply analysis

11

92.32%

4.70%

1.72% 0.71% 0.55%India

Pakisthan

US

South & North Sudan

Australia

World Guar Production Share


State wise Acreage

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State 2012-13 2013-14E Reason

Rajasthan 45.26 41 Declined sowing in unirrigated area due to lower yield

Gujarat 2.46 4.8 Higher price realization than castor seeds

Haryana 2.42 3.9 Higher price realization than Bajra

MP 0.52 0.48 Lower yield percentage and less accessibility of buyers

Punjab 0.42 0.49 Good price realization by last year

MH 0.34 0.24 Lower yield from last year crop and few processing centers

AP 0.23 0.14 Last year crop damage and lower yield percentageTotal (lakh

ha) 51.65 51.05 -1.16% Lower prices compared with last year

Source : Agri ministry & TG


State wise production with reasons

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Guar Seed Production (lakh tons) and % changesstates 2012-13 2013-14 % Change RemarksRajasthan 21.14 17.47

Yield prospects suffered due to prolonged dry weather in Rajasthan, after good monsoon at sowing time.

Gujarat 1.23 2.31Haryana 1.22 1.72Others 0.56 0.52Total 24.16 22.02 -8.85



Guar Seed –Last Ten years Area and Production Trend

14

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14E0.00

10.00

20.00

30.00

40.00

50.00

60.00

28.67 29.5633.44 34.73

38.63

29.90 28.37 29.50

51.65 51.05

22.02

Area Production

Area & Production in Lakh ha/tons Source : Agri ministry & TG


Indian Guar Seed Production & Gum Exports

15

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14E

0.002.004.006.008.00

10.0012.0014.0016.0018.0020.0022.0024.0026.00

22.02

0.83 0.83 1.38 1.50 1.50 2.07 1.903.62 4.87

3.395.00

Seed Production

Gum Exports

Source : DGFT & TG


Expected Indian Guar distribution -2013-14

16

Total Guar Seed Supply in 2013-14

Domestic usage of Guar Gum Sector Wise

Textile & Paper Food industry Shale Gas

30.24

6.71

Exports5.00

Domestic1.71

22.02Total Guar Production For 2013-14

Exports of Guar Gum Demand Sector Wise

Pharmaceutical Cosmetics Others

3.00 1.00 0.75 0.1 0.05 0.01

Food Industry PharmaceuticalPaper & Textile OthersCosmetics

1.06 0.47 0.06 0.03 0.06

Total Guar Gum Consumption

Beginning Stocks 8.22

Source : DGFT & TG (in lack tons)


Indian Guar seed Balance Sheet

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Attribute 2009-10 2010-11 2011-12 2012-13 2013-14E % Change

Beginning stocks seeds 16.32 10.69 5.88 0.99 8.22 733.01

Production seeds 5.931 12.06 16 24.16 22.02 -8.86

Total Supply Seeds 22.25 22.75 21.88 25.14 30.24 20.24

Domestic Consumption in terms of Seeds

5.21 4.82 4.66 5.62 6.89 22.60

Domestic Consumption in terms of Gum

1.8 1.2 1.1 1.4 1.71 22.14

Exports in terms of seed 6.35 12.05 16.23 11.30 16.67 47.36

Exports in terms of Gum 1.90 3.62 4.87 3.39 5 47.36

Total demand Seed 11.56 16.87 20.89 16.92 23.56 39.14

Ending stocks Seed 10.69 5.88 0.99 8.22 6.68 -18.70

Stock to use ratio Seed 92.47% 34.85% 4.74% 48.58% 28.35%* Conversion factor for Seed to gum is considered at 3.33 ( All units in Lakh tons)


S/c ratio of 28% or 15 weeks of consumption is generally bearish however it appears that farmers will hold to stocks if prices are below 4500 and traders will start stocking when an upward rally is signaled.


Guar World Acreage & Production

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• The World Guar Production for 2013-14 might be near 2.38 million tons, whereas Indian percentage share is near 92.3% due to higher production from last 2 years by good price realization.

• Pakistan Guar production might be near 1.12 Lakh tons for 2013-14 year on the back of lower rains in sindh region during pod formation stage. While, last year production was near 1.21 Lakh tons.

Country Acreage In Lakh ha % Change

Production In Lakh tons % Change2012-13 2013-14 2012-13 2013-14

India 51.65 51.05 -1.16 24.16 22.02 -8.86Pakistan 2.74 2.6 -5.11 1.21 1.12 -7.44US 0.41 0.5 21.95 0.32 0.41 28.13South & North Sudan 0.38 0.41 7.89 0.15 0.17 13.33Australia 0.26 0.31 19.23 0.114 0.13 14.04Total 55.44 54.87 -1.03 25.954 23.85 -8.11

Source : online news & TG

Technical analysis

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Guar Seed Jodhpur Spot Market, INR/Qtl Scenario - A

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• Scenario- A of Elliott wave study suggests that Guar Seed prices are on the verge of concluding the intermediate degree corrective wave C of zigzag type primary degree corrective wave 4 of by posting a low between INR 4500-4000 by Jan’14.

• Thereafter prices shall commence the intermediate degree impulse wave 1 of primary degree wave 5 towards INR 9000-10000 by the second half of the year 2014.

• The same shall be followed by an intermediated degree corrective wave 2 to bring prices lower towards INR 7000-6000 again.


Guar Seed Jodhpur Spot Market, INR/Qtl Scenario - B

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• Scenario- B of Elliott wave study suggests that Guar Seed prices are going through a corrective cycle of primary degree and shall post a low of around INR 4400 to conclude the corrective wave C of intermediate degree within a month.

• Thereafter prices shall enter a phase of bear market rally and commence combining corrective wave X of intermediate degree. This wave shall post a high around 11000 by the mid of the year 2014.

• Following that prices shall continue with corrective wave Y of intermediate degree to bring prices lower again.

© TransGraph Consulting Pvt Ltd Slide 22

Guar Gum Jodhpur Spot Market, INR/Qtl Scenario - A

• Scenario- A of Elliott wave study suggests that Guar Gum prices are on the verge of concluding the intermediate degree corrective wave C of zigzag type primary degree corrective wave 4 by posting a low between INR 12500-13200 by Jan’14.

• Thereafter prices shall commence the intermediate degree impulse wave 1 of primary degree wave 5 towards INR 28000-30000 by the second half of the year 2014.

• The same shall be followed by an intermediated degree corrective wave 2 to bring prices lower towards INR 19000-17000 again.


Guar Gum Jodhpur Spot Market, INR/Qtl Scenario – B

• Scenario- B of Elliott wave study suggests that Guar Seed prices are going through a corrective cycle of primary degree and shall post a low of around INR 12700 to conclude the corrective wave C of intermediate degree within a month.

• Thereafter prices shall enter a phase of bear market rally and commence combining corrective wave X of intermediate degree. This wave shall post a high around 38000 by the mid of the year 2014.

• Following that prices shall continue with corrective wave Y of intermediate degree to bring prices lower again.


Guar Gum FOB Prices At Mundra Port (USD/ton)


Guar Gum Spot Market Price Outlook

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TransGRAPH Price OutlookMarket Jodhpur Guar Gum Spot Market Week Closing INR 13500/qtl. on December 05 , 2013

Guargum price outlook1-3 Months: Slightly positive

INR 12600-16000

3-6 Months: Positive INR 15500-19500

Prices are close to bottom and might slowly enter a sideways to positive trend

Market Jodhpur Guar Seed Spot Market Week Closing INR 4650/qtl. on December 05 , 2013

Guarseed price outlook1-3 Months: Slightly positive

INR 4000-5400

3-6 Months: Positive INR 4500-6500

Thanking you for your attention.

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1 24 th Nov, 2013 Guar Scenario Mapping The Market Thought of Guar and Guargum markets Nagaraj Meda Managing Director TransGraph Consulting Pvt.Ltd 6 th.

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