All bets are off: guar gum prices set to stay high, says expert
Guar gum, a galactomannan from the seed kernel of the guar plant Cyamopsis tetragonoloba, is used as a thickener and stabiliser in baked goods as well as in a range of other food products including ice-cream, sauces and beverages.
Some 80 per cent of the world’s supply hails from India, with Pakistan the next biggest supplier.
Guar has traditionally been readily available to the food industry and always at cost effective prices. But demand from oilfields for the hydrocolloid is continuing to push prices up, according to IMR International’s Quarterly Review of Food Hydrocolloids.
Guar gum is used in hydraulic fracturing. Another hydrocolloid, xanthan gum, too, is in high demand for use in oilfields.
“For the last 6 to 9 months, guar prices have been increasing dramatically. Supply has been unable to meet demand,” reports IMR International’s hydrocolloid expert Dennis Seisun.
He said that previously guar prices seldom went above $0.90/lb (Euro 1.40/kg) and were often below $0.50/lb (Euro 0.80/kg.
"Unheard of requirements by sellers"
“The situation for guar has changed dramatically. Current prices are over $2.50/lb (Euro 3.90/kg) and continue to increase on a regular and frequent basis.
Buyers are faced with allocation of supply and unheard of requirements by sellers, such as 'pay in advance'. For now, there seems no end in sight to the high prices and tight supply of guar," said the expert.
High energy prices, remarks Seisun, mean the oilfield industry can afford more in its quest for higher yields.
Some observers had expected guar prices to stabilize and drop back to around $1.00/lb (Euro 1.60/kg) by early 2012.
“Any bets based on that premise have been lost,” commented Seisun. “Major buyers of food grade guar are faced with prices around $2.50/lb for delivery in the first quarter 2012, and even then, they cannot buy all volumes required.”
The possibility the oilfield industry will find an alternative to guar is another premise: “In this case, one would see a decline even more rapid than the increases we have seen. So far, however, there is no hint that a suitable replacement has been found,” said the consultant.
Raw material prices
While a range of hydrocolloid raw materials have undergone price increases in recent months, “some are steady this quarter, having already increased significantly in the last 12 to 18 months,” he added.
He notes that “only locust bean gum defies the general trend and remains at what many believe are unsustainably low price levels.”