Formaldehyde

01 November 1999 00:00  [Source: ICB]

BASF and DuPont's impending capacity additions will exacerbate the already oversupplied European market, resulting in further downwards pricing pressure in the near future

Supply/demand

Global capacity for formaldehyde is put at around 24-26m tonne/year, with capacity in western Europe standing at approximately 7.4m tonne/year. With demand at 6.5m tonne/year, the European market is reported to be considerably oversupplied in some areas: producers with a high captive use are selling excess material into the free market to try to regain some balance. European demand is slated to increase at a rate of 1-2%/year while global demand is set to increase at a rate of 2-3%/year, following GDP. Several large producers are planning to bring large capacities onstream in 2000 which will only add to the oversupply of formaldehyde which is currently occurring.

###8256###

Uses

Formaldehyde is a pungent-smelling gas and is commercially offered as a 37-50% aqueous solution, with 37% the most widely used grade. It is derived from methanol and approximately half of demand in Europe is used in the manufacture of urea formaldehyde resins and concentrates. From this, bonding adhesives are produced for use with plywood and other light wood products.

Another major use is in protective coatings and in the treatment of textiles and paper. It is also used as an application in fertilisers. Formaldehyde is also used to make acetal resins that are moulded into plastic engineering parts, that in turn are used in consumer, plumbing and hardware, and other industrial and automotive products.

Pricing

Formaldehyde prices are closely linked to the feedstock methanol, and generally tend to mimic its movements either upwards or downwards. In western Europe formaldehyde tends to be traded regionally over small distances due to its toxic nature: liquid formaldehyde is only transported within an approximately 320km radius of production and, as a result, European prices vary according to country and region and are unofficially set on a quarterly contract basis. The Italian contract price is generally seen at a lower level than the German one, for example. Current unofficial German contract prices are pegged at DM250-300/tonne ($136-163/tonne) according to one German producer for quarter four 1999.

In the US, prices are slated to move up in non-formula formaldehyde after a stagnant period of little price movement. Prices will be more in line with formula prices which absorbed the methanol increase being passed through to the downstream market. Upwards movement of 7-8% in both formula and non-formula material is expected for October.

Technology

Production of formaldehyde by the synthesis of methanol was first started in the 1920s. Today there are two main routes. The silver catalyst process employs a combination of dehydrogenation-oxidation with air and involves either the complete or incomplete conversion of the methanol. The other route involves the complete oxidation of methanol in excess air over a molybdenum and iron oxide catalyst. Yields from both processes are around 90-92% but the oxidation route has a lower reaction temperature and the metal catalyst is cheaper than silver. Formaldehyde can be produced from methane but a mixture of products needs to be separated.

Health and safety

Formaldehyde can irritate the skin, mucous membranes, eyes, nose and throat, and may cause skin and lung allergies. Contact can cause severe eye and skin burns. It is a suspected carcinogen in humans and should be handled with caution. The Occupational Safety and Health Administration (OSHA) guidelines relating to safe exposure limits to formaldehyde were tightened in 1992 to 0.75 ppm of air over eight hours, and the shorter exposure period time to 2 ppm in a 15-minute period. Formaldehyde is a highly flammable liquid/gas and a dangerous fire hazard.

EUROPEAN FORMALDEHYDE CAPACITY, '000 TONNE/YEAR*

Producer	Location	Capacity
Akzo Nobel	Sweden	170
BASF	Ludwigshfn. Germany	1200
	Antwerp, Belgium	108
Bayer	Krefeld, Germany	270-300
Caldic	Rozenburg,	200
	the Netherlands
Dyno	Lillestrom, Norway	180-200
Degussa-Hüls	Arnsberg, Germany	500
Elf Atochem	Villers Saint Paul,	200
	France
Neste	Delfzijl,	300
	the Netherlands
Perstorp	Perstorp, Sweden	70
Synthite	Mold, Wales	135-150

* on a 37% basis

Outlook

Two major European producers are bringing new capacities onstream in 2000, which will add to the already oversupplied formaldehyde market. BASF is investing approximately $17.2m in a formaldehyde production unit which will have a capacity of 180000 tonne/year (100% formaldehyde), due onstream in quarter four, 2000. Production capacity at the site by the end of 2000 will be 470 000 tonne/year after the closure of three older units there. DuPont is also bringing a 100 000 tonne/year unit onstream at Dordrecht, the Netherlands, slated to start production at the beginning of 2000. Investment will be $25m and Perstorp Chemicals has been contracted to operate the plant. A producer forecasts that silver-based capacity is going to slow, with oxide process capacity increasing to 85-90%. Sources report that the overcapacity of formaldehyde taking place will become worse with new capacities coming onstream, and will cause further downwards price pressure into the near future.

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly