Chapter 1. Production trade and markets


Description, uses and principal sources
World production, trade and outlook
Estimates of world production and exports


Description, uses and principal sources


Resin
Rosin
Turpentine


Resin

Crude resin obtained by tapping living pine trees is a thick, sticky, but usually, still fluid material. It is opaque (due to the presence of occluded moisture), milky-gray in colour, and inevitably contains a certain amount of forest debris (pine needles, insects, etc.) when it is collected from the trees.

Most Pinus species 'bleed' when the stem wood (xylem) is cut or otherwise injured, but probably only a few dozen of approximately 100 species which exist has ever been tapped commercially as a source of resin for rosin and turpentine production; in the others, poor yields and/or quality of the resin make exploitation uneconomic. The principal species which are presently tapped, and the countries in which this takes place, are listed in Table 1.

Table 1. Commercially tapped sources of pine resin: species and country of production

Speciesa

Producing countryb

Pinus elliottii Engelm.

Brazil, Argentina, South Africa, (USA, Kenya)

P. massoniana D. Don

People's Republic of China

P. kesiya Royale ex Gordon

People's Republic of China

P. pinaster Aiton

Portugal

P. merkusii Jungh. & Vriese

Indonesia, (Viet Nam)

P. roxburghii Sarg.

India, (Pakistan)

P. oocarpa Schiede

Mexico, Honduras

P. caribaea Morelet

Venezuela, (South Africa, Kenya)

P. sylvestris L.

Russia

P. halepensis Miller

Greece

P. radiata D. Don

(Kenya)

Notes:

a. In some case only the major species tapped in a particular country is indicated. In the People's Republic of China, P. massoniana is the main species utilized and although the contribution of species such as P. kesiya is small by Chinese standards, it is significant compared to the scale of production in other countries. Relatively small but increasing areas of P. elliottii and other exotic pines are tapped in China in addition to P. massoniana and other native species. In Mexico, P. oocarpa often occurs in mixed stands so that other species are likely to be tapped.

b. The list of countries is not intended to be exhaustive. Parentheses indicate a minor producer.

Until very recently, the crude resin was never considered to be a product for international trade. Although it might often be transported some distance by road or rail to the factory where it was processed, processing still took place within the producing country. However, the acute shortage experienced by some traditional producers in recent years has led to the importation of resin for the first time; India and Portugal are both known to have imported crude resin. Although losing the benefits of added value, new producers therefore have the option of tapping trees and exporting crude resin to nearby countries without needing to process it themselves.

Rosin

Rosin is the major product obtained from pine resin. It remains behind as the involatile residue after distillation of the turpentine and is a brittle, transparent, glassy solid. It is insoluble in water but soluble in many organic solvents. It is graded and sold on the basis of colour, the palest shades of yellow-brown being the better quality. Quality criteria and specifications are described in. Appendix 2. Several other physico-chemical characteristics influence the quality and these are largely dependent on the species of pine from which the rosin is obtained, i.e., they are determined more by genetic than environmental and processing factors. These aspects are discussed in more detail in Appendix 3.

Most rosin is used in a chemically modified form rather than in the raw state in which it is obtained. It consists primarily of a mixture of abietic- and pimaric-type acids with smaller amounts of neutral compounds. This intrinsic acidity, coupled with other chemical properties, enables it to be converted to a Large number of downstream derivatives which are used in a wide range of applications. The derivatives include salts, esters and maleic anhydride adducts, and hydrogenated, disproportionated and polymerized rosins. Their most important uses are in the manufacture of adhesives, paper sizing agents, printing inks, solders and fluxes, various surface coatings, insulating materials for the electronics industry, synthetic rubber, chewing gums and soaps and detergents.

Although it is more economical to manufacture derivatives if large quantities of rosin are involved, small producers often manufacture simple derivatives for sale in the domestic market as a substitute for imported products. For example, fortified rosin sizes can be made based on the reaction of rosin with maleic anhydride. However, for the purposes of this report, no further reference is made to the technical aspects of additional processing or to the products them selves.

Turpentine

Turpentine is a clear, flammable liquid, with a pungent odour and bitter taste. It is immiscible with water and has a boiling point above 150C. Quality criteria and specifications are indicated in Appendix 2. Turpentine is a mixture of organic compounds, mainly terpenes, and its composition can vary considerably (more so than rosin) according to the species of pine from which it was derived. This greatly influences its value and end use and is discussed in greater detail in Appendix 3.

For some applications turpentine is used in whole form, usually as a solvent for paints and varnishes or as a cleaning agent. However, like rosin it is a very versatile material chemically, and nowadays, it is used mostly after further processing. It usually undergoes fractional distillation to isolate the desirable chemicals (mainly alpha-pinene and beta-pinene) which are then transformed into value-added derivatives. This further processing is only economic if it is carried out on a very large scale, and it is not something to be considered by a new producer of gum naval stores. Occasionally, the turpentine is rich enough in alpha-pinene, for example, to be used in whole form. The derivatives are widely used in fragrance, flavour, vitamin and polyterpene resin manufacture, and form the basis of a substantial and growing chemical industry. The biggest single turpentine derivative, synthetic pine oil, is used in disinfectants, cleaning agents and other products with a 'pine' odour. Many derivatives, including isobornyl acetate, camphor, linalool, citral, citronellol, citronellal and menthol are used either on their own or in the elaboration of other fragrance and flavour compounds. A few of the minor constituents of turpentine, such as anethole, are employed for fragrance or flavour use without the need for chemical modification. Downstream derivatives are not discussed further in this report.

World production, trade and outlook


Production and trade
Prices
Major markets
Trading structures and procedures
Trade in crude resin
People's Republic of China
Indonesia and other countries of Southeast Asia
Portugal and elsewhere in Europe
Russia
North America
Central and South America and the Caribbean
Africa
Indian sub-continent


Many of the uses to which rosin can be put are subject to intense competition from synthetic, petroleum-based resins, and between gum rosin and tall oil rosin. Tall oil rosin, which used to suffer from odour problems associated with its method of production and a tendency to crystallize, was considered to be inferior to gum rosin for many applications. Today, most of these problems have been overcome and tall oil rosin competes more effectively with gum rosin. Technical developments which have led to more effective formulations for many rosin-based products have meant that less rosin is needed to achieve a particular result. In the paper industry, for example, the development of more effective fortified rosin sizes and emulsions, and changes in the paper-making process itself, have led to a marked decrease in the amount of rosin consumed per tonne of paper produced. The increasing demand for paper, however, means that the use of rosin by the paper industry is still substantial.

Any detailed analysis of the naval stores industry which attempts to follow production, trade and markets beyond the primary rosin and turpentine stage, and between the different sources of naval stores, is complex and difficult and beyond the scope of this report. In any case, a prospective new producer of gum naval stores will first need to assess local pine resources, and their capacity to meet domestic or regional markets for rosin and turpentine (rather than their derivatives), and such additional detail is unnecessary.

Production and trade

Total annual production of rosin is about 1.2 million tonnes world-wide. Of this, it is estimated that almost 720000 tonnes, or 60%, is gum rosin; most of the remainder, about 35% is tall oil rosin and the rest is wood rosin. World production of turpentine is approximately 330000 tonnes from all sources; almost 100000 tonnes (30%) is estimated to be gum turpentine, and the bulk of the remainder is sulphate turpentine.

The naval stores industry is complex and ever-changing. In the early part of the century, gum naval stores production was the dominant, and in most cases, the only, means of producing rosin and turpentine. Wood naval stores production, involving the uprooting and extraction of old pine stumps, developed in those countries with large areas of raw materials, such as the United States and the former Soviet Union; production in the United States peaked during the 1950s and has since declined to a low level. The recovery of tall oil rosin and sulphate turpentine as by-products of chemical pulping of pine chips also began during the 1950s.

As labour in the more industrialized countries has become more expensive and less willing to undertake the task of tapping, gum naval stores production has declined and the centre of its production has shifted. The United States and many former producing countries of Europe are either no longer producers, or are now only able to sustain production at very low levels. Production has also declined in countries such as India and Mexico; in India, a shortage of trees for tapping has added to the other problems. During the 1980s, Brazil emerged as a significant producer of gum naval stores, but here too, the cost of labour is now being felt. Also, government financial incentives which encouraged new planting in Brazil have been reduced, so as existing areas of plantation come to the end of their tapping life fewer suitable trees are available to replace them.

The focus of production for world gum naval stores today is Southeast Asia. The People's Republic of China has been the world's dominant producer for many years, but a dramatic increase in production, signalled by the installation of an improved and expanded processing capacity in the early 1980s, has seen Indonesia become the second biggest producer of gum rosin and turpentine in the world. Chinese production accounts for 430000 tonnes (about 60%) of the total annual production of gum rosin and Indonesia accounts for a further 69000 tonnes (almost 10%). While Chinese production is unlikely to increase further, Indonesia has an ample (and growing) number of trees available for tapping and the potential to increase production significantly in the years to come.

The People's Republic of China and Indonesia also dominate world trade in gum rosin and turpentine. Trade statistics for the major exporting and importing countries are given in Appendix 6. Chinese exports of gum rosin were approximately 277000 tonnes in 1993 (70% of world trade) and Indonesian exports were about 46000 tonnes. Russia and Brazil produce more gum rosin than Portugal but most of it is used to meet domestic needs. Portugal is the third biggest exporter and exports most of its output (about 26000 tonnes in 1992, although some of this was produced from imported crude resin). A much smaller proportion of the turpentine produced in the People's Republic of China is exported (about 5500 tonnes); both Indonesia (7500 tonnes) and Portugal (6000 tonnes) export more.

The future supply of gum rosin and turpentine to the world market depends mainly on production trends in the People's Republic of China, Indonesia and Portugal (in that order), and to a lesser extent, Brazil. It also depends on consumption trends in China which are difficult to predict; increasing Chinese industrialization and domestic consumption of naval stores may eventually result in a decreasing surplus available for export. The desire to earn foreign exchange, and the potential for some provinces to expand production as others decline (see below), may enable exports to be maintained at about their present level. Any decrease in exports could be partly or wholly made up by increased supplies from Indonesia.

The availability of gum rosin (and turpentine) decreased sharply in late 1994 as the effects of severe floods in the People's Republic of China during June to September became known. Many of the major production areas were affected and this led to a significant reduction in China's ability to collect and process crude resin and export it to world markets. Some trade estimates have suggested that supplies for 1994/95 may be reduced by as much as 30-40%. This damaging drop in production has been compounded by a rapid and competitive expansion in the number of licensed exporters within the country, and by a radical change in the export licensing system. Severe droughts in the production areas of Indonesia and Brazil also led to reduced production in 1994, and as a result of the ensuing disruption and disorganization, world prices rose sharply between late 1994 and early 1995.

Prices

Estimates for gum rosin price levels from 1991-94, and for the first quarter of 1995, are shown in Table 2. They show the large price rises between those dates and the difference in the price of rosin from different origins, but they are not exact transaction prices

Table 2. Gum rosina: landed prices, 1991-95b (US$/tonne)


1991

1992

1993

1994

1995

Portuguese

800

765

795

835

900

Chinese

675

675

650

575

750-775

Indonesian

570

620

575

560

650-670

Brazilian

680

680

600

590

775-850

Source: London dealers

Notes:

a WW grade
b Average annual prices except 1994 (July) and 1995 (January)

It is likely that prices will fall back from the high levels of early 1995 to about US$ 700/tonne by the end of 1995. However, some uncertainty exists because the extent of lost production in the People's Republic of China, and the ability for production to recover during 1995/96 is not known. At the early 1995 price levels, Portugal and Brazil could both expand tapping but further falls in rosin prices would make this extra output doubtful. Indonesia will continue to expand production.

It is not useful to give a similar price series for gum turpentine, which is traded at high prices in drums or much lower prices in 20000 litre ISO tanks. The scale and extent of international trade is more limited than for gum rosin, but a price level of US$ 450 delivered was typical from 1993 to mid-1994. Levels of US$ 600-650/tonne c&f India or Europe would be more representative of early 1995 price levels.

Major markets

Virtually all the non-producing countries in the world (and some of the producers) import rosin and turpentine, or their derivatives or synthetic competitors. Examples of the scale of imports can be seen in some of the trade statistics in Appendix 6. The biggest markets for imported gum rosin are Japan, Western European countries, particularly Germany, the Netherlands and France, the Republic of Korea, the United States and India. Globally, the European Community (EC) is the biggest importer and consumer, and the People's Republic of China is its biggest supplier by far. France and Spain are the biggest importers of gum turpentine in the EC; they fractionate it and manufacture downstream derivatives for domestic consumption and re-export. Japan and India are other large importers of turpentine; supplies of rosin and turpentine to India supplement indigenous production. The very large requirements for both rosin and turpentine in countries such as the United States and the former Soviet Union are met primarily through domestic supplies of tall oil rosin and sulphate turpentine.

Elsewhere, although demand may be relatively low it is still significant. Demand is sometimes met by domestic production. In Kenya, the paper industry uses about 1000 tonnes of rosin per year, most of which is supplied from local sources. In other countries it is necessary to import most or all of the requirements. Thailand, for example, produces a few hundred tonnes of rosin but imports several thousand tonnes a year.

Trading structures and procedures

In some of the major producing countries, the structure of the industry, and the channels of distribution of gum naval stores into the international market, has changed in recent years. In Portugal, individual producers have formed producer groups through which trade is conducted. This relatively small number of groups has generally simplified the negotiation of imports from Portugal and given some measure of consistency in the level of prices. Conversely, there has been a move away from the more centralized system of trading in the People's Republic of China to one in which different provinces have the freedom to enter into contracts with international buyers. Even within one province there may be several groups competing for sales.

Most of the production in smaller producing countries is for domestic consumption. The processors sell directly to end users such as paper mills, paint or chemical companies. However, there are some basic procedures and practices which should be noted by prospective new producers or others considering the sale of exports. Most purchases are made on the basis of agreed specifications. As indicated in Appendix 2, these specifications will vary according to the origin of the rosin or turpentine. New producers will therefore need to reassure potential buyers of the quality of the material being offered by providing samples beforehand and, perhaps, a trial shipment. International trade is normally conducted through agents or dealers, rather than by direct negotiation between producer and end user. Agents usually act on behalf of a specific producer. Dealers buy and sell on their own account, their main contacts being other dealers, producers and end users. They are very well informed about markets and trends, prices, product uses and end user requirements; this knowledge may be difficult for producers to acquire, particularly small ones.

A new producer of gum naval stores may wish to sell directly to the final user to avoid paying commission to intermediaries. When selling the products domestically, this may be the only option. However, in the international market, various middlemen have a valuable role and end users will usually prefer to conduct their transactions using agents and dealers. Commercial practices vary between companies and countries, and details of terms and conditions for buying and selling are a matter of negotiation between the two parties. Established suppliers are normally paid by cash against documents, but buyers would prefer to make payment after receipt of the merchandise from new producers.

Brief reference is made to packaging options for rosin and turpentine in Chapter 3 and they are described in more detail in Appendix 4. Buyers of material transported by ocean freight prefer to minimize transport and handling costs by importing a minimum shipment size of one container load (approximately 20 tonnes gross weight).

Trade in crude resin

In any analysis of world production and trade in gum naval stores, the volume of trade taking place in crude resin needs to be estimated. Until recently, this did not need to be considered as all resin was processed at origin and rosin and turpentine were the primary products of trade. However, trade in crude resin has developed over the past five years as the c capacity for tapping has fallen in some of the traditional producing countries, notably Portugal and India. These countries have excess processing capacity (usually fully depreciated) which can be brought back into production if an economic, external source of crude resin is found. The absence of capital costs therefore enables the processors of imported resin to sell the outputs (gum rosin and turpentine) at a price which only need cover raw material and processing costs, freight, drums and profit. The sale of crude resin also allows producing countries with a surplus to earn extra revenue without investing in additional capacity for processing.

The main suppliers of crude resin in 1993 were Brazil (exporting about 12000-13000 tonnes), Indonesia (2000-3000 tonnes) and the People's Republic of China (3000-4000 tonnes). Total exports in 1993, based on trade estimates, were therefore 17000-20000 tonnes. Present levels are likely to be much reduced in the short term as a result of the destructive floods in China in 1994 and the impact of severe summer droughts in Indonesia (Java) and Brazil. At the moment, Brazil is probably exporting less than 10000 tonnes of crude resin, and the People's Republic of China and Indonesia may not be exporting any. The buyers of crude resin in 1993 were Portugal (which imported 8000-10000 tonnes of Brazilian resin) and India (which bought 3000-4000 tonnes from Brazil, and most of Chinese and Indonesian resin exports, to give a total of 8000-11000 tonnes).

There is little likelihood that tapping will be expanded in either Portugal or India, and if the present reduced trade in crude resin becomes permanent, Portugal will have less rosin to sell, and India will need to import more Chinese and Indonesian rosin and turpentine in order to meet domestic requirements.

It is suggested elsewhere (Chapter 4) that once domestic market demand has been satisfied, the export of crude resin could be more profitable for new, small producers than the export of small volumes of gum rosin and turpentine. However, this would depend on a continuing demand for external supplies of resin from Portuguese and Indian processors.

One unfortunate consequence of the use of crude resin which is not indigenous to the country in which it is processed is that the compositional characteristics of the rosin and turpentine may no longer indicate source of the processed products. In the past, the different species of pine used by the major producers of internationally traded gum rosin and turpentine have conferred on the products intrinsic chemical properties which denote their origin. End users have also become accustomed to the predictable, consistent properties of products delivered from traditional suppliers; the greater the trade in crude resin, the less certain these properties become.

In the next sections, production and trade in the major producing countries and regions is described.

People's Republic of China

Vast areas of native pines growing in the south of the country form the basis of the Chinese gum naval stores industry. The principal species used is P. massoniana (mostly natural stands), with smaller contributions from P. yunnanensis, P. latteri, P. tabulaeformis and P. kesiya. A small proportion of the resin raw material is obtained from plantations of P. massoniana and a further small, but increasing, amount from plantations of exotic P. elliottii. P. elliottii was introduced primarily as a timber species but it has been found to give significantly higher yields of resin than the native pines when tapped. The main production areas are Guangxi, Guangdong, Fujian, Jiangxi, Yunnan and Hunan provinces; Guangxi and Guangdong are currently the most important. However, these two provinces are among those which are undergoing dramatic socio-economic changes, including the drift of the rural population to more attractive and remunerative employment in the cities. This may eventually lead to a decrease in gum naval stores production in these traditionally important areas. On the other hand, Yunnan has a considerably greater standing pine resource than any of the other provinces plus the benefit of a large pool of low-cost labour, so it will probably assume greater importance as a supply source.

In spite of the very recent fall in production due to the floods in 1994, total annual production of crude resin in recent years has exceeded 500000 tonnes, giving around 400000 tonnes of gum rosin after processing. Resin processing covers all scales of operation from the very small, involving only a few hundred tonnes of resin, to the very large; one factory in Wuzhou, eastern Guangxi, is claimed to be the largest in the world, with a rosin output capacity of 40000 tonnes/year. A recent Chinese source (Shen Zhaobang, 1994) indicates that in 1993, 430000 tonnes of rosin were produced, of which approximately 60% (277000 tonnes) was exported. Of the rosin which remains for domestic consumption, about 44% is used for the manufacture of soap (1990 data) and about 35% for paper. Increasing amounts of rosin and turpentine (30000 tonnes and 20000 tonnes, respectively) are converted to downstream derivatives within the country.

Indonesia and other countries of Southeast Asia

Although Indonesia has produced rosin and turpentine for many years, it was not until comparatively recently that it emerged as a major force in world trade. Virtually all crude resin production is based on extensive areas of P. merkusii plantations on Java. These are managed by Perum Perhutani, the Forest State Corporation, who are also responsible for the tapping and processing operations (although some of the factories fall within the private sector). A very small quantity of resin is produced intermittently in Sumatra. In the early 1980s, modern processing methods were introduced to replace the older, direct-fired distillation units. Production subsequently rose from 16000 tonnes of crude resin (9000 tonnes of rosin) in 1981 to 70000 tonnes of resin (49000 tonnes of rosin and 8000 tonnes of turpentine) in 1991; by 1993, it had risen to over 100000 tonnes of resin (69000 tonnes of rosin and 12000 tonnes of turpentine). Slightly lower production levels are forecast for 1994 because of a severe drought which affected resin yields.

Although most of the rosin and turpentine produced in Indonesia is exported, an increasing proportion of both is being consumed domestically. Perum Perhutani statistics for 1993 show that approximately 46000 tonnes of rosin (two thirds of total production) and 7500 tonnes of turpentine were exported. Figures from the official Indonesian trade statistics are significantly lower. Production of downstream derivatives is likely to attract increasing attention in the years to come.

In 1991, production in Indonesia came from about 100000 ha of pine. The actual area of planted pine in Java is about four times this figure and still expanding. There are also large areas of pine plantations on Sumatra, Sulawesi and Kalimantan and these, too, are increasing in size to meet the demand for wood pulp. The potential for increased resin production is therefore very large (assuming that labour continues to be available) and in future years Indonesia will undoubtedly consolidate and improve its position as the second biggest producer of gum naval stores after the People's Republic of China.

Production elsewhere in Southeast Asia is very low. Vietnam produced approximately 2500 tonnes of resin from P. merkusii in each of the five years from 1986 to 1990, and as the country is now open to foreign investment this figure may rise in the future. There is some production in Thailand and Laos from P. merkusii, and some from P. kesiya in Myanmar (Burma), but it is very low (less than 500 tonnes/year) and does not enter international trade.

Portugal and elsewhere in Europe

The warm summer temperatures which are conducive to high resin flow, and the large areas of natural pine which exist, made Portugal and some Mediterranean countries major producers of gum naval stores at one time. Some production also took place in central and eastern Europe. However, increasing labour costs and a growing unwillingness amongst workers to undertake tapping has led to a decline in production, sometimes to the point where it has ceased altogether.

P. pinaster occurs quite widely in central and western areas of northern Portugal and, with the exception of recent purchases of crude resin from Brazil, is the sole source of Portuguese gum naval stores. In the ten years 1978 to 1987, crude resin production averaged 110000 tonnes/year and yielded 84000 tonnes of rosin and 19000 tonnes of turpentine. By 1992, production had declined to approximately 30000 tonnes of resin (equivalent to 22000 tonnes of rosin), although a slight increase is predicted for the 1994/95 crop year. Most of Portugal's rosin output is still exported, although an increasing amount is being used internally; much of its turpentine is fractionated or consumed domestically.

France no longer produces gum rosin or turpentine and production in Spain has fallen to a very low level. Production in central and eastern European countries such as Poland, Bulgaria, and the former Yugoslavia and Czechoslovakia has also declined. Greece produced about 6000 tonnes of resin from P. halepensis in 1993, but the trend for production is downwards. Production of resin is now reported to have ceased in Turkey, although in the late 1980s it produced about 3000 tonnes/year from P. brutia.

Russia

P. sylvestris covers vast areas of Russia and other parts of the former Soviet Union and forms the basis of a substantial naval stores industry. The main areas for gum naval stores production are in Irkutsk and Yekaterinbourg (the former Sverdlovsk region), the central parts of the Krasnoyarsk region, and the central and northern regions of the European part of Russia. Siberia and the Urals account for about 50% of crude resin production; the remainder comes from European Russia. The colder regions of Siberia are not conducive to high resin yields and productivity, in general, is believed to be low. Russian sources have stated that production of resin has fallen in recent years from a high of 115000 tonnes to around 90000 tonnes in 1992; this total is believed to include very minor amounts of larch and fir oleoresin. If plans to tap trees in the Crimea go ahead, production may be stabilized at this level as resin yields in this area are expected to be higher.

Most of the rosin and turpentine produced in Russia is used domestically, but small amounts have been offered on the international market in recent years.