In our last report we have already mentioned the strong price decline in guar gum. However, many market observers assumed that prices will continue to decline at the end of 2015.
That has not happened, although the prices decrease for crude oil continues and the demand of the fracking industry for guar gum remains limited. The situation in the US fracking companies is well known, and is not expected to change within the next months.
If the current prices for guar gum in India are compared to the prices before the fracking boom, it can be noticed that we are moving back to the price level before the boom, if the exchange rates Indian rupee against US dollar and US dollar against Euro are being ignored. For this reason we don’t expect further major price decreases.
The guar price has settled at a level where it had remained relatively stable for many years before. This is a dramatic development and indicates functioning markets, which are ruled by supply and demand. As a matter of fact, significant financial assets were destroyed by over-sized capacity expansions in India.
The next harvest in autumn will be interesting. Since all players in the guar business are aware of the smaller amounts, volumes will be considerably more modest, which in turn will contribute to price stability.
Covering purchases for the next few months, if not already done, can be approached without pressure.