Natural gums are plant products, formed by the disintegration of plant cellulose. These are typically extracted from seeds of plants like Guar, Tamarind, Cassia tora, etc. These are polysaccharides that increase the viscosity of solutions even when added in very small quantities. Natural gums are preferred over synthetic gums in food applications.
The natural resins, gums, gum-resins (NRG) and balsam’s global market are estimated to be about 1358.44 million USD. India is the second largest supplier of natural resins & gums in international market, with a share of 16.8%, next to France, which has a market share of 26%. In India, the Guar gum has a lion’s share in total NRG production as well as in exports. Therefore, the focus of this blog is on guar gum.
Guar gum-Industry at a Glance
India enjoys monopoly in the Guar gum industry with a market share of over 80%, as it has the most suitable climate for Guar gum cultivation. The Guar industry is driven by the export market, as more than 70% of domestic production is exported. The major export destinations are USA, China, Canada, Germany & Russia. Rajasthan is the largest guar producing state followed by Gujarat, Haryana and Punjab. Rajasthan alone accounts for 70% of the total production in India.
Guar Seed Cross – section and Process flow
The guar seed has 3 parts – Germ (40-45% of the weight), Endosperm (38-45%) and Husk (14-16%), as shown in figure – 1. The gum powder is produced from endosperm in a two stage process. In the first stage, the guar splits are produced and the by-product is Guar Meal (67%) (Korma – 37% & Churi – 30%). The splits are then pulverized into gum powder, and the powder is further processed into various derivatives.
Figure 1: Guar gum seed break up
Derivatives of Guar Gum & Industry specific application
Guar gum has wide range of applications in Food Industry, Textiles, Oil well drilling, Cosmetics & Pharmaceuticals, Paper, Mining, Construction and Explosives. The derivatives of guar gum powder are grouped into Non-ionic, Anionic and Cationic.
Figure 2: Derivatives of Guar gum
The applications in various industries are listed in Table1.
|Table 1: Applications of Guar Gum|
|Food||Thickening, gelling, emulsifying agent and stabilizer|
|Textile||Sizing & Finishing agent|
|Oil well drilling||Fluid loss controlling agent, additives in fracturing fluids. Fast Hydration Grade is used|
|Pharmaceuticals||tablet binders, disintegrants, emulsifier, suspending agent, gelling agent, stabilizing agent, thickening agent, film forming agent, sustaining agent and coating agent|
|Cosmetics||Conditioner and viscosifier, thickener in toothpastes & shampoos|
|Paper||To get better finish, improved sheet formation, increased bursting & fold strength and denser surface for printing|
Demand & Supply
Guar consumption was been around 22.7 lakh tonnes in the year 2016-17. The consumption is volatile and varies depending on the export market, which accounts for more than 70% of the domestic production. The graph depicts the trends in consumption of guar seed in the past decade.
Chart 1: Consumption of Guar seed in export and domestic markets from India
Globally, oil and gas industry is the biggest user and domestically food industry is the largest consumer of Guar gum. (See chart 2&3). The sector wise demand of guar gum powder in international & domestic market is shown below in Chart 2 & 3.
Chart 2 & 3: % application across industries in Domestic & International markets
On the supply side, there are more than 600 guar processing units in India with an installed capacity of around 10 lakh tonnes. The present capacity utilization of the industry is less than 50%, due to weak demand from the export markets. However, the demand is expected to increase due to increasing oil prices, which result in higher capital expenditure on oil exploration related activities.
Price Volatility of Guar Gum
The prices of guar gum powder is highly volatile (see chart 4) and are a function of factors such as crop cultivation, shale oil and gas exploration, availability and price of substitutes, etc. The users shift to the substitutes based on price competitiveness. But guar gum has its own advantages, for example: Guar gum is soluble in both hot and cold water as against Tamarind Kernel Powder (TKP), which is soluble only in hot water. The various substitutes to guar gum are discussed in Table 2,
|Table 2: Substitutes to Guar gum|
|Textile||CMS (Carboxy Methyl Starch), CMTKP (Carboxy Methyl Tamarind Kernel Powder) and Sodium Alginate|
|Paper||TKP, Potato Starch, etc|
|Food||Xanthan Gum, Agar , CMC (Carboxy Methyl Cellouse)|
|Shale Oil& Gas Exploration||Synthetic Polymers|
Chart No.4: Per kg  variation of Guar gum prices over a period of years
Guar Gum v/s TKP
Among natural gum, Guar gum faces competition from TKP. TKP is derived from the tamarind seed. It has excellent water absorption property and high viscosity as well. The application includes, thickening agent in sizing process of textile & printing industry and binding agent in pharmaceutical industry. The detailed comparison of Guar Gum & TKP is shown in Table No.3,
The minimum viable capacity is 6TPD (6 tonne per day) and the investment required to setup guar gum powder from Guar splits is INR 4 Cr, including the civil structure, machinery and working capital. The capital cost would increase by INR 2-3 Cr, if one is manufacturing the powder directly from the seed due to the additional investment in plant & machinery and working capital. The Breakeven period is more than 5 years.
Profitability & Governing factors
The profitability depends on the conversion margins, or the spread between the guar gum and guar seed price. The spread has been volatile and has ranged between 1.4 times to 3 times over the past decade. The profit margin can be increased by having control over the seed price, by engaging with farmers in contract farming. The profits/high returns can also be improved by making value added products for specific industry such as dairy/oil.
Why Guar Gum is an interesting opportunity?
The international demand for Guar Gum from oil and gas sector is likely to increase following higher oil prices. The demand from food sector from both domestic and international markets is likely to remain strong.
Given the availability of idle domestic capacity, one could look at purchasing or leasing existing units, thereby reducing the initial capital investment. Instead, the investment could be made towards research and development to develop new derivatives for food and other applications.
How Can We Help?
If you are interested in starting up natural gum manufacturing unit, we can assist you in the following:
- Identifying potential markets including domestic as well as international.
- Detailed project report preparation – Financial analysis, Profit & Loss statements for a period of 7 years, calculation of ROI, etc.
- Identifying existing units that are available for sale and in valuation of such units
As per ICAR – Indian Institute of Natural Resins & Gums report
 In the year 2012-13, the price of guar gum hit all time high, this is due to the huge demand from the oil exploration companies.
 Spread is the ratio of guar gum to guar seed prices
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