Tuesday, June 12, 2012

Guar Gum Shortage

Halliburton, the worlds' largest supplier of hydraulic fracturing services (aka fracking) is reporting reduced profit margins this quarter because of a shortage of a natural-based viscosity modifier - guar gum. In other words, the best way to get frack gas out of the ground, some of which will be used to make synthetic polymers, is to use a natural polymer. Isn't this ironic?

The shortage of guar gum is rather different than the shortage of nylon-12 that's been discussed earlier. With natural products such as guar gum, you are going to be facing the usual ups and downs of market prices, but there will not be any sudden events equivalent to an explosion that will take out 30% of the guar bean crop in an instant. What's happening here is that people are starting to frack gas at an unecpectedly fast rate and the guar bean supply wasn't increased at the same rate. This shortage can be eliminated by planting more of the beans, although the time for a crop to be planted and harvested is not that much less than it is to repair a destroyed manufacturing site, so in some ways, it is equivalent to having a production plant blow up.

No comments: