Guar Scenario. Mapping The Market Thought of Guar and Guargum markets. Nagaraj Meda. Managing Director TransGraph Consulting Pvt.Ltd.

Transcription

1 Mapping The Market Thought of Guar and Guargum markets Nagaraj Meda Guar Scenario Managing Director TransGraph Consulting Pvt.Ltd 24 th Nov, th & 7 th, Dec 2013 Jaipur 1

2 Price drivers review 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 Natural Gas prices in US increased shale Gas Production and higher Guar Gum Exports from India Higher Guar seed Production in Expected Higher Ending stocks & higher Production 2

3 Demand analysis 3

4 Indian Guar Gum Exports Sector Wise Guar Gum in the International Markets Guar Gum usage in the Domestic Markets 2% 1% 2% 4% 2% 4% 15% 28% 20% 60% 62% Oil drilling Paper&Textile Cosmetics Food industry Pharmaceutical Others Food Industry Pharmaceutical Others Paper & Textile Cosmetics 4

5 Shale production: Chemical used per Fracking Quantity Required per activity Position Chemicals ( 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 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 Source : Chevron & TG 5

6 US Shale Production Trend (BCF) US Shale & Oil Production and % Change y/y Production %Change 24.16% % 5.58% 1.45% 1.85% e 2014p 2015p 30% 25% 20% 15% 10% 5% 0% Source : EIA & TG 6

7 US Recoverable Gas Reserves (TCF) US Recoverable Shale Gas Reserves Up to 2040 ( In TCF) Source : EIA & TG Shale gas Tight gas Coalbed methane US shale Gas reserves are near 26.5 trillion cubic feet and US may meet nearly 60% of its energy requirements from Shale. 7

8 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 BCF of gas in 2014, US would require approx., 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 lakh tons of gelling agents. Depending on price competitiveness there is an excellent scope for demand growth of Guar gum. 8

9 World Recoverable Shale Gas Reserves (TCF) world Recoverable Shale Gas (TCF) Source : EIA As per EIA Estimation shale gas will emerge as most important energy resource due to its cost competitiveness. 9

10 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. 10

11 Supply analysis World Guar Production Share 4.70% 1.72% 0.71% 0.55% India Pakisthan US South & North Sudan 92.32% Australia 11

12 State wise Acreage Source : Agri ministry & TG State E Reason Rajasthan Declined sowing in unirrigated area due to lower yield Gujarat Higher price realization than castor seeds Haryana Higher price realization than Bajra MP Lower yield percentage and less accessibility of buyers Punjab Good price realization by last year MH Lower yield from last year crop and few processing centers AP Last year crop damage and lower yield percentage Total (lakh ha) % Lower prices compared with last year 12

13 State wise production with reasons Source : Agri ministry & TG Guar Seed Production (lakh tons) and % changes states % Change Remarks Rajasthan Gujarat Yield prospects suffered due to prolonged Haryana dry weather in Rajasthan, after good monsoon at sowing time. Others Total

14 Guar Seed Last Ten years Area and Production Trend Area & Production in Lakh ha/tons Source : Agri ministry & TG Area Production E 14

15 Indian Guar Seed Production & Gum Exports Source : DGFT & TG Seed Production Gum Exports

16 Expected Indian Guar distribution Source : DGFT & TG (in lack tons) Total Guar Production For Beginning Stocks 8.22 Total Guar Seed Supply in Total Guar Gum Consumption 6.71 Exports of Guar Gum Demand Sector Wise Exports 5.00 Domestic 1.71 Shale Gas Food industry Textile & Paper Pharmaceutical Cosmetics Others Domestic usage of Guar Gum Sector Wise Food Industry Paper & Textile Pharmaceutical Cosmetics Others

17 Indian Guar seed Balance Sheet Source : Agri ministry & TG Attribute E % Change Beginning stocks seeds Production seeds Total Supply Seeds Domestic Consumption in terms of Seeds Domestic Consumption in terms of Gum Exports in terms of seed Exports in terms of Gum Total demand Seed Ending stocks Seed 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. 17

18 Guar World Acreage & Production Country Acreage In Lakh ha % Production In Lakh tons % Change Change India Pakistan US South & North Sudan Australia Total Source : online news & TG The World Guar Production for 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 year on the back of lower rains in sindh region during pod formation stage. While, last year production was near 1.21 Lakh tons. 18

19 Technical analysis 19

20 Guar Seed Jodhpur Spot Market, INR/Qtl Scenario - A 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 by Jan 14. Thereafter prices shall commence the intermediate degree impulse wave 1 of primary degree wave 5 towards INR by the second half of the year The same shall be followed by an intermediated degree corrective wave 2 to bring prices lower towards INR again. 20

21 Guar Seed 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 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 by the mid of the year Following that prices shall continue with corrective wave Y of intermediate degree to bring prices lower again. 21

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 by Jan 14. Thereafter prices shall commence the intermediate degree impulse wave 1 of primary degree wave 5 towards INR by the second half of the year The same shall be followed by an intermediated degree corrective wave 2 to bring prices lower towards INR again. 22

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 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 by the mid of the year Following that prices shall continue with corrective wave Y of intermediate degree to bring prices lower again. 23

24 Guar Gum FOB Prices At Mundra Port (USD/ton) 24

25 Market Guar Gum Spot Market Price Outlook TransGRAPH Price Outlook Jodhpur Guar Gum Spot Market Week Closing INR 13500/qtl. on December 05, 2013 Guargum price outlook Market 1-3 Months: Slightly positive INR Months: Positive INR Jodhpur Guar Seed Spot Market Week Closing INR 4650/qtl. on December 05, 2013 Guarseed price outlook 1-3 Months: Slightly positive INR Months: Positive INR Prices are close to bottom and might slowly enter a sideways to positive trend 25

26 Thanking you for your attention. WWW (4 lines) TransGraph Consulting Private Limited / 2 / 1, A.P. Civil Supplies Bhavan Lane, Somajiguda, Hyderabad , India.

27 LEGAL INFORMATION This document is the whole property of Transgraph Consulting Private Limited, Hyderabad, India (hereafter TransGraph ). The following acts are strictly prohibited: Reproduction and/or forwarding for sale or any other uses Posting on any communication medium Transmittal via the Internet Terms of usage Upon receipt of this document either directly or indirectly, it is understood that the user will and must fully comply with the other terms and conditions of TransGraph. By accepting this document the user agrees to be bound by the foregoing limitations. This publication is prepared by TransGraph and protected by copyright laws. Unless otherwise noted in the Service Agreement, the entire contents of this publication are copyrighted by TransGraph, and may not be reproduced, stored in another retrieval system, posted on any communication medium, or transmitted in any form or by any means without prior written consent of TransGraph. Unauthorized reproduction or distribution of this publication, or any portion of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum extent necessary to protect the rights of TransGraph. The information and opinions contained in this report have been obtained from sources TransGraph believed to be reliable, but no representation or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any assets (commodities, currencies, etc) or other investment. Information and opinions contained in the report are published for the assistance of recipients, but are not to be relied upon as authoritative or taken in substitution for the exercise of judgment by any recipient; they are subject to change without any notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein. Any views expressed reflect the current views of the analysts, which do not necessarily correspond to the opinions of TransGraph or its affiliates. Opinions expressed may differ from views set out in other documents, including research, published by TransGraph. Any reference to past performance should not be taken as an indication of future performance. No member in the public related to TransGraph accepts any liability whatsoever for any direct or consequential loss arising from any use of material contained in this report. Analyst Certification Each analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the analyst's views about any and all of the factors and assets (commodities, currencies, etc) named in this report, and (ii) no part of the analyst's compensation is directly or indirectly, related to the execution of the specific recommendations or views expressed herein. Copyright TransGraph Consulting Private Limited, Hyderabad, India. Prepared by Consulting Team TransGraph Registered Office: /2/1, AP Civil Supplies Bhavan Lane, Somajiguda, Hyderabad INDIA 27