Oversupply plagues rosin makers The U.S. naval stores industry is in a bind. Stocks of all kinds of rosin —gum, wood, and tall oil—are high. Rosin prices are dropping. Yet, domes­tic use will increase only gradually re­gardless of price. It will take about two years before the rosin supply and de­mand balance returns to normal. And the situation is the same in foreign markets as in the U.S.

That's the sobering message that Henry L. Meyer presented at the Pulp Chemicals Association's International Naval Stores Meeting in Atlanta last week. Meyer, president of Chema-pine Inc., Great Neck, N.Y., traced how rosin producers went from boom to bust "practically overnight."

During 1973 and the first half of 1974, domestic rosin supplies were ex­tremely tight. The shortage, along with inflation, pushed rosin prices upward. Tall oil rosin went from 14 cents per lb in June 1973 to 26 cents in September 1974. Gum rosin rose from 22 cents a lb to 40 cents over the same time span.

Starting in late 1973, imports of gum rosin, particularly from Portugal and China, came to the rescue. Meyer says that the industry would not have had a single drum of rosin in stock at the end of the 1973-74 crop year had it not im­ported 106,000 drums (517 lb per drum) that season. Imports had been only 24,120 drums the previous season and a paltry 480 drums in 1970-71.

Imports climbed further, to 162,200 drums in the 1974-75 season, but most of this came before the slump hit busi­ness last fall. Fortunately, most over­seas purchases were made before short­ages struck producing countries and foreign prices soared.

As a result, U.S. consumers escaped the brunt of the foreign price increases. Portuguese gum rosin prices more than doubled between early 1973 and Octo­ber 1974. Chinese prices increased 60 to 80%. When U.S. companies bought their imported gum rosin, foreign prices were slightly higher than domes­tic prices. By the time the material reached this country, the cost, includ­ing duty, was often lower than domes­tic prices.

Then came the bust, Meyer says. Starting in October 1974, all rosin in­

ventories became excessive almost overnight. In the crop year 1974-75 that ended in March, inventories of gum rosin rose from 32,900 drums to 96,770 drums. Wood rosin stocks jumped from 37,490 drums to 99,110 drums (520 lb a drum). And stocks of tall oil rosin increased from 37,560 drums to 86,870 drums (also 520 lb a drum). By the end of the crop year, total rosin stocks were 283,000 drums, the highest since the Commodity Cred­it Corp. stocks were liquidated and nearly three times what they were at the start of the season.

More important, almost half of the total inventory—132,000 drums—was held by consumers and distributors. In the preceding five years, consumer and distributor stocks had run 35,000 to 58,000 drums.

It isn't surprising, says Meyer, that rosin sales stopped dead in their tracks starting last October. They still are slow, and production figures bear this out. In the first five months of the cur­rent crop year (April through August), total rosin production was down 40% compared to the similar period last year. Wood rosin is bearing the brunt of the decline; tall oil to a lesser ex­tent. Only gum rosin output shows an increase, but gum rosin accounts for only 10% of total rosin production. Nevertheless, gum rosin prices fell from 37.7 cents to 24.3 cents per lb between March and August.

Meyer believes that excess inven­tories of rosin derivatives largely have been liquidated and that derivative sales are improving. But this has not yet worked back to the rosin itself. Rosin stocks at producing plants have continued to climb, from 150,700 drums in March to 176,900 drums in August.

Total gum rosin stocks were three times higher at the start of the current season than they were a year before and six times higher than they were in 1973. Yet, Meyer thinks that gum rosin may not be in as bad shape as the sta­tistics indicate. He estimates that gum rosin output will increase this season to 80,000 drums, up from last season's 54,400 drums. Gum production is up 10 to 15%, and more than the usual

amount of storage gum has been car­ried over and will be distilled this season.

However, Meyer points out that, of the 97,000 drums of gum rosin stocked at the start of the season, about 79,000 drums were held by consumers. After the recent price drop, this material represents high-priced inventory that is being worked off before new purchases are made. He believes that these in­ventories may be liquidated before the end of the current season next March.

In addition, processors plan to use more of their better grades captively. Some of the medium grades may go to the recently renewed loan program. Commodity Credit Corp. and the American Turpentine Farmers Associa­tion recently signed an agreement reac­tivating the price support program. Thus, by the end of the season, Meyer says that gum rosin stocks may be cut in half to about 45,000 to 55,000 drums. Though still on the high side, he says that this level is manageable.

Wood rosin output has been cut about 20% so far this season, compared to last year. However, stocks at pro­ducing plants have been reduced only moderately, from 75,900 drums in March to 56,900 drums in August. And Meyer fears that wood rosin inventories still could be high by the end of this season.

Production of tall oil rosin also has been cut back, from 330,100 drums during the first five months of the 1974-75 season to 239,200 drums this season. Yet, producers' stocks have ac­tually increased from 65,000 drums in March to 96,000 drums in August. If the paper business improves, even more crude tall oil may become avail­able before fractionators can find a market for the rosin. For tall oil rosin, Meyer says, "finding a market" is not even a question of price. Domestic use, he says, will increase only gradual­ly regardless of price. Export prices have dropped drastically, but export sales still have suffered. Exports of tall oil rosin were down to 12,200 drums through the first four months of the season, compared to 52,400 drums dur­ing the first third of last season.

About the only thing certain about the current season, according to Meyer, is that the U.S. won't be importing any foreign rosin except for that already under contract, which cannot be canceled. Statistics bear him out. From April through July this year, the U.S. imported only 7400 drums of gum rosin. During the same period last year, 57,300 drums were brought in.

European countries, Japan, and Aus­tralia also are reducing rosin imports this year for the same reasons that the U.S. is—excess inventory in the face of an economics slump. Consequently, rosin stocks are accumulating in all producing countries. Meyer believes that it may take two years before worldwide rosin supply and demand are back in balance. D

Southern pine stumps are bulldozed and shipped to plants to make rosin

Oct. 13, 1975C&EN 11