The guar industry has evolved from being used for domestic and feed industries to numerous other
industries, such as oil & gas drilling, pharmaceuticals, and cosmetics. The guar gum market witnessed a
shift, which was unexpected for participants in the industry. Since 2010, there has been an increasing
demand for guar gum from the oil industry due to its chemical attributes and absence of inexpensive and
similar substitutes. This has led to high fluctuating prices of guar since the last five years.
Many factors influence the availability, demand and prices of guar gum.
Below you find the results concerning political influences, regional developments and shifts per grade (food, oil, pharmacy)
Influence Oil politics on Guar market
The OPEC-Russia export limitation deal has directly impacted the U.S. oil &
gas industry, resulting into increase in its crude oil exports and a higher demand for guar gum. In addition, growth in food processing industry in the U.S. is anticipated to boost the demand for guar gum.
The trade dispute between the US and other countries and, to a lesser extent, the Brexit are uncertainties that can cause more damage to the global economy than we expect. So far, the impact on the global has been limited. In a few cases, we will lead to sectoral adjustments.
In the UK, there is certainly room for trade regarding types of industry and disposable income. Growth has been observed in the oil and gas industry. The industry around convenience food and processed food in the UK is also sufficiently large.
However, the uncertainties that keep the trade around Great Britain in check until the brexit deal has been negotiated make it an unfavorable market to start.
Many companies do not wait for the situation to resolve itself and move to mainland Europe or even further. This movement is worrying for the overall economic projection. A decline of the economy has a direct effect on the markets where guar gum is traded.
ECONOMIC TRENDS - REGIONS
Globally there is growth in Gross Domestic Product and in Purchasing power parity. The income of consumers is growing, and with that the disposable income. This development is causing a growth in the luxury goods market. Including cosmetics, self-care products, convenience food and Ready-to-eat food.
Although it is expected by some economists that this growth will reach a ceiling or a delay in the coming years, its impact on the industry is considerable. This causes a significant increase in the demand for Guar in both the food grade and the oil industry as well as in pharmaceutical applications.
Growing population, rising disposable income, and rapid urbanization in Asia Pacific have spurred consumption of processed food. Sales of Ready-to-eat products on the rise due to busy lifestyles and changing eating habits. This, in turn, is boosting product demand in this region. China and India are expected to be major consumers owing to rapid growth in oil and gas exploration activities and presence of vast technically recoverable resources.
Rise in oil well drilling in China in an attempt to increase their production is also anticipated to drive the demand of guar gum.
North America, U.S. in particualr, is estimated to be the largest market for guar gum owing to substantial growth in adoption of hydraulic fracking and oil well drilling in the oil and gas industry. This trend is expected to continue over years to come due to availability of massive technically recoverable oil and gas resources.
Rise in oil rig count in U.S. is one of the major factors for market growth in the region. This has resulted in increased product demand, thus pushing its prices. Moreover, efforts by the U.S. government to enhance exploration activities is expected to positively affect market growth.
As per data released by Baker Hughes the number of oil rigs in USA has increased to 1051 as on 15th February 2019 up by 76 compared to 16th February 2018. The total number of oilrigs was recorded at 2264 worldwide in January 2019 compared to 2089 in the same month last year.
The food processing sector is one of the major consumers of guar gum in Europe. Awareness regarding the product’s weight-loss benefits is expected to boost its demand. Despite disappointing exploration results and lack of investments in the oil and gas sector, exploration drilling in Europe is expected to bounce back in 2018, resulting in a rise in product consumption.
Germany is leading European country in terms of guar gum owing to its substantial growth in food and beverage processing and the trend is expected to continue in the near future.
ECONOMIC TRENDS - MARKET DYNAMICS
Several reports note that the price for guar gum fluctuates. It is influenced by issues beyond the control of Viscolloids, such as rainfall (or lack thereof) political shifts, prices drops of other export countries due to change in tax policy. Recent months are a testimony of fluctuating prices (and a significant decrease in the price) of guar gum.
August: €115 per Quintal (100kg)
November: €130 per Quintal
Februari: €105 per Quintal
(more on prices in the chapter Internal Market)
Shift from food to oil
Food industry was the major user industry of guar gum few years earlier. But shale gas and oil industry has overtaken it to become the dominant user of guar gum in recent years. Oil and gas industry is the largest consumer of guar gum, accounting for more than 50% of total consumption.
Growing Demand for Natural Cosmetics
European cosmetic industry has a high demand for guar gum in order to replace engineered thickeners and emulsifiers to cater the consumer’s interest in (certified) natural cosmetics products. This offers a large number of opportunities for gum exporters. Germany, France, and the UK have the highest number of launches of natural cosmetic products. For normal and natural beautifying agents, there are restrictions on the texturizing ingredients producers can utilize. The opportunities for guar gum are the highest in natural and near-natural cosmetics in the European markets.
Increasing consumer awareness
A similar trend can be observed in food industry. There is a growing demand for healthy biological products and less reliance on chemical supplements and additives in food.
Alternatives for guar
The market faces rising threat of substitution. Among them, but not limited to: cassia gum,carob bean gum, tara gum, locust bean gum. The emergence of gluten free substitutes like chia seeds and psyllium is a major restraint for market.However, as long as the prices remain stable, the market will be able to withstand the threat of substitution by both natural and synthetic products. Pervasive environmental concerns provide a competitive edge to the product over synthetic substitutes. The market faces major challenges in terms of price volatility, low production, and limitation on research and development.
Use as animal feed
The growing usage of guar for animal feed manufacturing creates a huge scope for the demand in other European countries, like France, Italy, Denmark, and Spain.t
Regulatory organizations and NGO's advise governments and the general public on the importance of a healthy and balanced diet. World Food Programme, WHO and Unicef have included guar gum in their recommended additives, and as additive in infant formula as part of their child welfare programs.