1 24 th Nov, 2013 Mapping The Market Thought of Guar and Guargum markets Nagaraj Meda Managing Director TransGraph Consulting Pvt.Ltd 6 th & 7 th, Dec’2013 Jaipur
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24th Nov,
2013
Guar Scenario
Mapping The Market Thought
of
Guar and Guargum markets
Nagaraj Meda
Managing Director
TransGraph Consulting Pvt.Ltd
6th & 7th, Dec’2013
Jaipur
© TransGraph Consulting Pvt Ltd Slide
Price drivers –review
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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
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© TransGraph Consulting Pvt Ltd Slide
Indian Guar Gum Exports Sector Wise
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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
© TransGraph Consulting Pvt Ltd Slide
Shale production: Chemical used per Fracking
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Position Chemicals
Quantity Required per activity
( tons)
Acid Hydrochloride 4.25
Biocides Quaternary Ammonium Chloride 17
Corrosion Inhibitor Methanol 4.25
Friction Reduce Petroleum Distillate 4.25
Gelling Agent Guar Gum Or Carboxy Methyl Cellulose 42.5
Oxygen Scavenger Boric Acid 4.25
Cross Linker Sulfate 8.5
Source : Chevron & TG
Gelling Agent
Support gel formation, increase viscosity
for proper down hole transportation of
sand, ideal proppant carriage
Guar gum, hydroxyethylcellulose, ( Carboxy
Methyle cellulose), Petroleum Distillate Ethylene
Glycol
© TransGraph Consulting Pvt Ltd Slide
US Shale Production Trend (BCF)
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14926
15896
16783
17027
17342
24.16%
6.49% 5.58%
1.45% 1.85%
0%
5%
10%
15%
20%
25%
30%
13500
14000
14500
15000
15500
16000
16500
17000
17500
18000
2011 2012 2013e 2014p 2015p
Production %Change
US Shale & Oil Production and % Change y/y
Source : EIA & TG
© TransGraph Consulting Pvt Ltd Slide
US Recoverable Gas Reserves (TCF)
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0.00
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
© TransGraph Consulting Pvt Ltd Slide
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.
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© TransGraph Consulting Pvt Ltd Slide
World Recoverable Shale Gas Reserves (TCF)
As per EIA Estimation shale gas will emerge as most important energy resource due to its cost competitiveness.
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1115
802 707 665
573 545 437 390
285 245
60
0
200
400
600
800
1000
1200
world Recoverable Shale Gas (TCF)
Source : EIA
© TransGraph Consulting Pvt Ltd Slide
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
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92.32%
4.70%
1.72% 0.71% 0.55% India
Pakisthan
US
South & North Sudan
Australia
World Guar Production Share
© TransGraph Consulting Pvt Ltd Slide
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 percentage
Total (lakh
ha) 51.65 51.05 -1.16%
Lower prices compared with last year
Source : Agri ministry & TG
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State wise production with reasons
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Guar Seed Production (lakh tons) and % changes
states 2012-13 2013-14 % Change Remarks
Rajasthan 21.14 17.47
Yield prospects suffered due to prolonged
dry weather in Rajasthan, after good
monsoon at sowing time.
Gujarat 1.23 2.31
Haryana 1.22 1.72
Others 0.56 0.52
Total 24.16 22.02 -8.85
Source : Agri ministry & TG
© TransGraph Consulting Pvt Ltd Slide
Guar Seed – Last Ten years Area and Production Trend
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28.67 29.56 33.44 34.73
38.63
29.90 28.37 29.50
51.65 51.05
22.02
0.00
10.00
20.00
30.00
40.00
50.00
60.00
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14E
Area Production
Area & Production in Lakh ha/tons Source : Agri ministry & TG
© TransGraph Consulting Pvt Ltd Slide
Indian Guar Seed Production & Gum Exports
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22.02
0.83 0.83 1.38 1.50 1.50 2.07 1.90 3.62 4.87
3.39 5.00
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
22.00
24.00
26.00
Seed Production
Gum Exports
Source : DGFT & TG
© TransGraph Consulting Pvt Ltd Slide
Expected Indian Guar distribution -2013-14
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Total Guar Seed Supply in 2013-14
Domestic usage of Guar Gum Sector Wise
Textile & Paper Food industry Shale Gas
30.24
6.71
Exports 5.00
Domestic 1.71
22.02 Total 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 Pharmaceutical Paper & Textile Others Cosmetics
1.06 0.47 0.06 0.03 0.06
Total Guar Gum Consumption
Beginning Stocks 8.22
Source : DGFT & TG (in lack tons)
© TransGraph Consulting Pvt Ltd Slide
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)
Source : Agri ministry & TG
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.
© TransGraph Consulting Pvt Ltd Slide
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 %
Change 2012-13 2013-14 2012-13 2013-14
India 51.65 51.05 -1.16 24.16 22.02 -8.86
Pakistan 2.74 2.6 -5.11 1.21 1.12 -7.44
US 0.41 0.5 21.95 0.32 0.41 28.13
South & North Sudan 0.38 0.41 7.89 0.15 0.17 13.33
Australia 0.26 0.31 19.23 0.114 0.13 14.04
Total 55.44 54.87 -1.03 25.954 23.85 -8.11
Source : online news & TG
Technical analysis
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© TransGraph Consulting Pvt Ltd Slide
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.
© TransGraph Consulting Pvt Ltd Slide
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.
© TransGraph Consulting Pvt Ltd Slide 23
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.
© TransGraph Consulting Pvt Ltd Slide 24
Guar Gum FOB Prices At Mundra Port (USD/ton)
© TransGraph Consulting Pvt Ltd Slide
Guar Gum Spot Market Price Outlook
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TransGRAPH Price Outlook
Market Jodhpur Guar Gum Spot Market
Week Closing INR 13500/qtl. on December 05 , 2013
Guargum price outlook
1-3 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 outlook
1-3 Months: Slightly positive
INR 4000-5400
3-6 Months: Positive INR 4500-6500
Thanking you for your attention.
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