Consumption of formaldehyde depends mainly on the construction, automotive and furniture markets. In the developed world, growth in demand will typically track gross domestic product (GDP) although it will be strongly correlated to the construction industry. 
Formaldehyde is usually produced close to the point of consumption since it is fairly easy to make while it cannot be shipped easily over long distances. It can develop stability-associated problems during transport. As a result, world trade in formaldehyde is minimal.
Formaldehyde is commercially offered as a 37% to 50% aqueous solution, with 37% being the most widely used grade which may also contain 0-15% methanol and a polymerisation inhibitor.
The main downstream demand for formaldehyde around the world is in production of thermosetting resins. The largest group is the amino resins produced by condensing either urea or melamine with formaldehyde.
Urea formaldehyde (UF) resins are the largest sector, accounting for some 46% of global demand, according to the formaldehyde producer Hexion Specialty Chemicals. Binders in non structural wood based panels are the largest application, in particular for particleboard and medium density fibreboard (MDF).
Melamine formaldehyde (MF) resins are used predominantly as paper impregnating resins for surfacing of panels, for example in laminate flooring and as binders and adhesives where improved water resistance is required. The automobile industry also consumes MF resins in the form of clear coats.
The next largest outlet for formaldehyde is phenolic formaldehyde (PF) resins. Being water resistant, they are used as durable binders and adhesive in structural wood panels and as binders in mineral wool insulation. Their high thermal stability and fire resistant properties are utilised in a wide spectrum of uses in the automotive and construction industries including brake linings, foundry binders, insulation foams and composites. There is also a growing use in the oil industry to enhance oil well productivity.
After thermosetting resins, the next largest use for formaldehyde is in production of polyacetal or polyoxymethylene (POM). This accounts for around 7 or 8% of formaldehyde demand, says Hexion. Polyacetals are tough engineering thermoplastics used in a variety of applications such as replacing metals in electrical, electronic, automotive and consumer applications.
Methyl di-p-phenylene isocyanate (MDI) is the fastest growing of the formaldehyde derivative markets. Primary uses are for polyurethane foam, binders, polyurethane elastomers, adhesives and sealants. Markets include construction, household appliances, footwear and other consumer goods, and automotive.
Butanediol (BDO) can be manufactured using formaldehyde. Most BDO is used to produce intermediates for downstream production of polyester thermoplastics resins used in the textile fibres, electrical/electronic and automotive markets.
Pentarythritol is produced by the alkaline condensation of formaldehyde with acetaldehyde. Primary uses are for alkyd resins, lubricants, tall oil esters. With a decline in solvent based coatings, demand for pentaerythritol is falling around the world.
The three largest markets are Europe, North America and China. In Western Europe, markets are mature with GDP growth typically 2%/year and manufacturing costs high. By contrast in the eastern part of Europe, economies are growing at typically around 5%/year. In Russia the growth rate is even higher with GDP growth of around 7%/year.
The wood panel industry is expanding rapidly eastwards in Europe, driven by growing local economies, low manufacturing costs and an abundance of low cost raw materials, in particular wood and natural gas, explains Hexion. The furniture manufacturing industry has declined in the west partly due to factories relocating in eastern Europe and partly due to the large retail groups sourcing lower cost imports from China.
The outlook for formaldehyde in Europe is a growing market of 5%/year or more in eastern Europe and Russia in line with the high projected GDP growth in these expanding economies, says Hexion. In the western part of Europe, overall growth is likely to be GDP levels at best with possibly some decline due to the adverse affects of low cost imports from eastern part of Europe and China.
The formaldehyde market in North America at around 5m tonnes (at 37% concentration) is roughly half that of Europe. The most significant driver is also the housing market and construction industry, which together account for over 50% of total sales.
The largest North American market for amino resins is non structural particleboard production which appears to be declining while the domestic ready-to-assemble (RTA) furniture market has been devastated by imports from China. Therefore, the forecast growth rate for particleboard production in North America is negative, points out Hexion. As elsewhere, trends in flooring have boosted the growth of melamine surfaced MDF. Further growth of the laminate flooring market is expected.
The second largest North American outlet for formaldehyde is phenolic resins, which are used mainly as adhesives in production of oriented strand board (OSB) and plywood. Since its introduction 25 years ago, the use of OSB as a structural panel in house construction has grown rapidly replacing the more expensive traditional plywood. Phenolic resins are also used as a binder for thermal insulation used in housing and construction.
The largest non-forest product consumer of formaldehyde, representing 12% of the North American consumption, is polyacetal resin, produced at two plants. This is followed closely by MDI production used in the growing polyurethanes industry.
Overall the North American formaldehyde industry is a large and mature industry but nevertheless expected to provide steady growth.
Growth in the US is projected to average 1%/year through to 2010, according ICB Americas. Demand in the US will grow from 4.76m tonnes in 2006 to reach 4.96m tonnes in 2010.
China has become the world’s largest producer of formaldehyde. By the end of 2005, there were over 300 formaldehyde producers with a total capacity around 11m tonnes/year and an estimated consumption of 6-7m tonnes, estimates Hexion.
About 75% of the formaldehyde produced is used in production of UF, MF and PF resins for the wood panel and furniture industry. Around two thirds of wood products manufactured are exported. It would appear that the only factor controlling the growth of the Chinese wood products industry is availability of wood.
There has been a huge increase in MDI production in China to meet an increasing domestic demand for construction products, white goods and elastomers for shoe soling. Chinese MDI production is expected to reach 800,000 tonnes/year by 2010.
There is currently only small production of polyacetal in China with around 200,000 tonnes/year of polyacetal imported while demand is growing at around 8%/year. However, much of this will be produced locally when new plants come on stream in 2008.
(Updated: April 2007. Sources: ICB Americas Chemical Profile, 30 April 2007; CMAI 2006 World Methanol Conference, Prague, 28-30 November 2006).