P.1 

OAR Box 1872 

Prepped by Keeia Richards 

Document Number: 

88) 11-1-137 

Docket Number: 

A-90-19 

Printed 11/26/2008 8:52:01 AM Sheet 88 of 204 
P.2 

.-SEAT.$Y:RIP. N.C, 27709 ; 2-11-91 ; 4:19PM ; RADIAN CORPO 

(pitfmt'tuif T^tdntfi 5f*(lfAfd 

JULY 1990 

PrrKoui Report - 3une 1963 

A-90-19 

H-l-137 

FORMALDEHYDE 

fOCUS....Formaldehyde ie tha first of the series of aliphatic aldehydes. At ordinary temperatures, pure 

formaldehyde is a colorless gae with a pungent, suffocating odor. However, formaldehyde ia normally produced and sold as uater aolutiona containing variable amounts of methanol, usually included to inhibit 

self-condensation in an aldol-type reaction, formaldehyde ie also eold in a semi-condensed form as a solid 

flake or powder, paraformaldehyde. Because of it* relatively low cost, high purity and variety of chemical 

reactions, formaldehyde has become one of the world's most important chemicals, with world-wide capacity 

now exceeding 12 million metric tons (calculated ae 17% solution). 

Almost 2/3 of ell formaldehyde consumed in the US goes into products that are closely oonnected to the 

construction induatry, with moat formaldehyde going into urea and phenolic resins used in plywood, par* 

ticleboerd and laminatea. Thus, the growth pattern for formaldehyde has been, and will continue to be 

closely tied to the general US economy, but particularly to housing etert statlstica. During the 1985-1989 

period, formaldehyde demand grew at e compounded overall rate of about 35? per year, end reached a record 

high of almost 6.4 billion pounds in 1989. Year-to-year tha growth has not been eo smooth, with a building 

slump in 1S8S reflected in reduced demand and than spectacular growth from 1987 to 1988- apurred on by 

etrong domestic construction, but also by strong export markets for US wood products, brought about by a 

uaaker dollar. Demand began to weaken by mid-1969 ae a reflection of a generally weaker domestic economy 

and e downturn in tha construction induetry. About 705? of all formaldehyde produced is consumed captively, 

as most US producers are forward integrated into wood produote resins. DuPont and Hoechst Celanese ere 

etrong factors in the merchant market. 

OUTLOOK ...Uith the 

0«-

end 

of 

end 

production down 9% in the first quarter 1990 ae compared to 1989, the effacta of 

BI'OIII. J ..«^n)* y *» e bftin g • ^sortgl y #ol * I M fck* •»**4*>w*»4A«>l-l ^^M.it,' , pa>tA*wl«ffl ^ LY> tho Mo« iir.OQOC. 

mand growth for formaldehyde in acetal resins, 1,4 butenedlol for polybutylene terephthalate reains, 

as an ingredient in the production of methyl diphenyl diisocyanetes (ADI), will continue at levels 

around 55? per year, which will help make up for consumption lost in building products. These three 

uses account for a total of 255? or overall US formaldehyde demand. However, for the year 1990 overall demend ie expected to be down by about 1-25?, but could be down by aa much ae 10?? if the construction industry slourinun becomes more protracted. Assuming a business recovery by mid to late 1951, formaldohydo 

demand growth should averags about 2-35? per year for the next several years. 

A potential threat to the long term growth in demand for formaldehyde ia the continuing ecrutlny given 

the product from a health and safety standpoint. Currently, new regulations have been instituted thet 

tighten up allowable limits for formaldehyde amissions in tha workplace. These restrictions have not yet 

impinged on the volume usage of formaldehyde. However, there ie elweye the possibility that newer regulations will cause an actual reduction in the use of formaldehyde because of lte toxic nature. The extent of 

thie threat is not quantifiable at this time. 

PRICING. ...Formaldehyde, being in a constant severe overcapacity position - which ie not expected to abate 

in tha foreseeable future - has generally sold well under so-called "Trade List" prices. However, on a 

trend line beaie, aotual formaldehyde selling prices have moved normally in lock step uith methanol 

prices. A somewhat wall accepted induetry standard is that the price of formaldehyde (on a 50% basis) 

movae 0.1 cent per pound for each 1.0 cant per gallon change in the ooet of methanol. Uith strongar 

methanol postings in early 1990, formaldehyde list prioee increased to the 10.7 to 11.5 cents per pound 

range, but can be expected to eaee if the building slump intensifies. A milestone for domestic demand of 7 

billion pounds is not expected to be reached before 1995. 

AVERAGE PRICE RANGE - FORMALDEHYDE - 373? 

Centa Per Pound - Uninhibited - Delivered - Gulf H<® 

Trade List 

Avg. Salsa 

i»«» «mmM«>i»«tim > HISTORICAL ""«»«"«<«»"»'««»»«>•«•»••• 

1960 1965 ' 1970 1975 1980 1985 1986 19B7 196B 1989 

~37I "573" "3 3 "775 "771 ~5T¥ "TTF T7B "BTu" ""57? * 

3 3 2 3 7 6 6669 * 

SUPPLY VO QOIAND.. ..Millions of Pounds....37$? Basis....Estimated....Domestic US 

Capacity 

Production 

Imports 

Exports 

Demand 

1960 

'71511 

1872 

12 

1860 

1965 

LS4UU 

3107 

10 

3097 

1970 

bilb 

4427 

17 

4410 

1975 

"B3BT 

4558 

127 

4431 

1980 

"B7BTJ 

5555 

10 

16 

5549 

RICAL * 

1985 

"B5U0" 

5606 

9 

9 

5606 

1986 1987 1988 

ubliu U'febU "975TT 

5549 5733 6280 

10 11 11 

18 14 19 

5541 5730 6272 

• PROJECTED • 

1990 1992 

1U.U "TUTS" 

10 

* PROJECTED • 

1990 1992 

9bb0 9ZbO 

6200 6670 

Production data derived from USITC statistics; import/export date is from US Bureau of the Census. 

AVAILABILITY....Formaldehyde capacity has always far outstripped demand, and this condition is expected to 

prevail for the foreseeable futures Formaldehyde, generally used as a solution in water, containing no 

more than 50-555? formaldehyde, ia "costly to ship long distances. Thus, many formaldehyde plante hevo been 

built proximate to facilities for the manufacture of thermosetting urea and phenolic reeins used primarily 

by the wood products industry. These resin/formaldehyde plant complexes ere eleo loceted in cloee proximity to the forest products industry. Capital ooste are not significant in formaldehyde, thus the prolifaraklwn w> oii,oiAo», onen.oyj.i.oj.j.y iuoscao units, current us Capacity is oistnouteo over «b oietlnct pxant 

1nnst<»n<, 1ed by integrate d used psadust »••! » eupplier o - Bsvdan wit h 12 sit** , Coetgi e Pool^l o wit h 9 

sites and Chembond uith a sites. 

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"SEN?*BY:R<TP. N.C. 27709 ; 2-H-91 ; 4:20PM ; RADIAN CORPORATION- 215 643 2772;# 3 

PRODUCERS M O CAPACITIES - FORMALDEHYDE - 775? BASIS - 1990 - MILLIONS OF POUNDS 

PRODUCER 

• Borden 

" BTL 

"OChembond 

-"" D. 8. Western 

u^Qsguaaa 

-- Du Pont 

, CAF 

CAPACITY 

IJ/b 

235 

400 

90 

65 

1585 

200 

PRODUCER . 

Georgle-tacirie 

Hercules 

koeohat Talsnesa 

inc 

Monsanto 

RVP 

Uright 

CAPACITY 

1SS5 

160 

?nn 

135 

475 

300 

114 

TOTAL 9550 

Hoechst Celanese has oompletad a 100 million pound expansion at Bishop, TX, bringing 

its capacity there to 1.9 billion pounds per year. DuPont ie moving to Lapcrte, TX a 

175 million pound unit previously run at Grasselli, N3 and will reactivate this unit 

in lata 1990. Georgia Pacific has acquired the Hampton, SC 50 million pound plant of 

BTL. Only incremental expansions are expected near term, which should .offeet somewhat 

the effeot of DuPont's closure of a SOO million pound Belle, UVA plant in early 1991. 

CM) USES....The largest end use for formaldehyde, accounting for slightly leas than 1/3 of demand in 1989, 

ia in the manufacture ef urea formaldehyde resins. UF rasina ara used primarily as bonding adhesives for 

presesd wood products suoh as partlcleboard and plywood, with particleboard applications dominating, 

taking up about 76-805? of UF resin output, and plywood 8-1 OS?. Other UF reain applications are in protective coatings, and textile and paper treating uses. UF concentrates are also uaad in fertilizer applications. Phenol formaldehyde resins are the second largeat uae for formaldehyde, taking up almost 1/4 of 

total demand. Plywood and particleboard applications dominate PF usage, accounting for 60% of demand, with 

use ae a binder for fiberglass insulation accounting for 165?

 or" total PF reain usage. Other smaller 

volume, mature end uses for PF reslna are aa molding compounda, laminating adheeives, friction material 

and abreaive binders, and protective coatings. Melamine formaldehyde resine, a relatively email and alao 

mature outlet for formaldehyde, are used in molding compounds, decorative laminates, dinnaruere, protective coatings, and paper and textile treatments. 

An important application for formaldehyde is as a co-reactant uith acetylene in the production of 1,4* 

butanediol, used to make polybutylene terephthalate resins, polyvinyl pyrrolidone end tetrahydrofuran. 

This end use, which has been growing et a 105? per year rate in the recent past, may level off aa other 

process routes to 1,4-BD^not based on acetylenic chemistry, are being developed. An additional major end 

uee is the polymerization" of formaldehyde to make acetal resine which are molded into engineering plaatic 

parts for appliances, consumer products, plumbing and harduare, and other industrial and automotive products. Reaction of formaldehyde uith ammonia yields hexamethylenetetramine which ia uaad primarily to cure 

phenolic molding compounds, but also hes use in the production of explosives and bactericides. 

END USE PATTERN - 1989 ESTIMATE 

DERIVATIVE PERCENT 

Urea Formaldehyde Resins & Concentrates 3U 

Phenol Formaldehyde Resins 24 

1,4-Butenediol 12 

Acetal Resins 9 

Haxamathylsnetstramine 6 

Pentaerythritol 5 

Melamine Formaldehyde Resins 4 

Methyl Diphenyl Diiaooyanatee 4 

Miscellaneous 6 

MANUFACTURING. ...Formaldehyde' is made from methanol by two processes: the silver catalyzed proceae uhere 

formaldehyde is made by a combination dehydrogsnation-oxidatlon procaaa; and the metal oxide proceae where 

methanol ie oxidized directly to formaldehyde, in the silver catalyzes process, vaporized methanol, 

together with air and steam pre-heated to 100s C, ie passed over a thin bed of silver-orystal catalyst. 

Formaldehyde is formed by dehydrogenation of methanol. The reaction is endothermio and requires heat which 

is provided by burning the hydrogen produced in the dehydrogenation reaction. The exit gaaee are quenched 

and condensed to produce a methenol-formaldehyda solution. The mathanolic formalin from the absorber can 

be tha final product or elee it ie distilled to lower methanol oontent to 15? or laea. 

The metal oxide process involves the oxidation of methanol over a catalyst of molybdenum end iron 

oxide. A mixture ef air and methanol are vaporized end passed into oatalyst-paekad reactor tubas. The 

reaction ia highly exothermic end heat generated provides steam for uee by let down turbines to drive 

pumps and to provide process heating. The effluent gaaee axe fed directly to an absorption tower. Demineralized water is fed et the top of the tower and formaldehyde solution la collected at the bottom. 

ENVIRONMENTAL ASPECTS....Formaldehyde ie toxic by inhalation, prolonged or repeated oontact uith the skin 

or muoous membrsnss, and by ingestion. It is extremely irritating to the ayes, nose and throat on axpoeure 

to concentrations ranging from 0.1 to 5 ppm. After years of controversy oonoernlng the safety and toxicity of formaldehyde, in 1989 CSHA issued a revised set of standards relating to expoaura limits. 

This standard reduces the permissible exposure level (PEL) for formaldehyde in all workplaces (including the general construction and mtftine industries) covered by the OSH Aot to 1 part per million parts 

of air (1 ppm) averaged over B hours end establishes a ahort term exposure level (STEL) (i.e. exposure 

during any 15-minute period) of 1 ppm. It alao sets an "action level" of 0.6 ppm treasured over 8 hours. If 

the axpoeure level is maintained below the STEL end the action level, employers may discontinue exposure 

monitoring and certain employee training. 

To the best of our knowledge the information contained herein ie accurate. However, we' 

do not assume any liability whatsoever for the completeness or accuracy of this report.