Rising input cost plays spoilsport for Guar Gum exporters
Diminishing export demand coupled with high input cost has forced 90% of the Guar Gum processing units in Jodhpur to down their shutters down.
There are around 50 Guar gum processing units, which post a combined turnover of over Rs 1000-crore. Indian Guar Gum Manufacturers Association president Purshottam Hisaria told ET that the situation has become grim for crushers and manufacturers. “It’s not shortage of Guar Gum that is causing problem for us.
It’s the diminishing export orders due to high landing cost, which is forcing us to close down.
Due to global down turn, the export demand of Guar Gum has already been halved. Now the steeping price of Guar Gum powder is further declining the export orders. There is no fundamental behind the rising Guar Gum prices as these are available in abundance in the warehouses of commodity exchanges.
Hedging and Futures trading has resulted in artificial escalation of prices. In last two months, Guar Gum producers have not received any considerable export order,” he said.
According to industry estimates, the cost of one kg Guar Gum powder has increased by over 30% in the last two months due to volatility in Guar Gum prices. Currently, manufacturers are not able to sell Guar Gum powder for less than Rs 70 per kg, which is driving away overseas buyers. “The market price of Guar Gum is at Rs 59 per kg.
The processing cost is around Rs 8 per kg and the packaging cost of Rs 3-4 per kg further spirals the Guar Gum powder costing. The export volumes have come down drastically from 2 lakh tonnes to 1 lakh tonnes,” Mr. Hisaria said.
Around 90% of the total Guar Gum production is exported to countries like China, US, Germany and France. That was not the case a decade back. Guar Gum powder was widely used in domestic industries like textile, medicines, food and paper industry as binding agent.
But rising prices forced domestic players to substitute volatile Guar Gum with Tamarind seed, starch and Carboxy methyl Cellulose. “Textile mills of Surat used to buy around 2000 tonnes of Guar Gum in those days. Now it has reduced to just 500 kg. This tells the complete story,” says Ashok Burad of Shree Shanti Enterprises, who is into this business for last 35 years.
The production of Guar Gum has been reduced by more than 60% due to weak monsoon. This year, the output is likely to be 1.10 lakh tonnes while the carry forward stock would be around 3.5 lakh tonnes.
“The export demand would not cross more than one lakh tonnes. In ideal situation, supply should be in excess of demand pulling down the prices. Most of the production has been cornered by speculators and investors. Due to hedging, supply is tight in the market making the procurement cost high,” Mr. Burad said.