Gum and Wood Chemicals

SIC 2861

Companies in this industry

Industry report:

The gum and wood chemicals industry is comprised of establishments primarily engaged in manufacturing hardwood and softwood distillation products, natural dyes, tanning materials, and related products. Companies that make synthetic organic tanning materials and synthetic organic dyes are classified in SIC 2869: Industrial Organic Chemicals, Not Elsewhere Classified and SIC 2865: Cyclic Organic Crudes and Intermediates, and Organic Dyes and Pigments, respectively. Gum and wood chemical producers are part of the larger industrial organic chemical industry.

Industry Snapshot

The 100 establishments in this industry manufactured $354.2 million gum and wood chemicals in 2008. About a third of businesses had at least 20 employees. These larger operations accounted for more than 90 percent of the industry's shipments. The majority of manufacturers were located in Texas, Florida, Missouri, Georgia, and California.

Background and Development

This industry grew substantially after World War II when construction companies, for example, needed wood treatment chemicals, adhesives, and sealants. The increasing popularity of outdoor barbecue grills during the 1950s and 1960s boosted sales of charcoal briquettes. Revenues and profits declined during the 1980s, however. Synthetic chemicals displaced many natural wood and gum chemicals in everything from dyes to sealants. In addition, environmental laws restricted the burning of charcoal.

Like organic chemicals derived from petroleum and natural gas, thousands of natural chemical products can be distilled from wood. Turpentine, for example, is extracted from pine gum and pine wood. Numerous oils and finishes can also be obtained from pine or other woods, as can many dyes, fuels, and resins.

By the mid-1990s, the outlook seemed brighter as environmental concerns about synthetics brought renewed interest in natural chemicals, such as dyes and fuel additives. At that time, about 40 percent of the industry's revenues came from sales of hardwood charcoal briquettes, 30 percent came from hardwood distillates such as oak extract, and 17 percent came from softwood distillates such as resin and turpentine.

Most merchandise in this category is sold to individual consumers who primarily purchase charcoal, turpentine, and other products for home use. Manufacturers of plastics used 11 percent of production in the early 1990s to create base resins and additives. Other industries used distillates and extracts to manufacture soaps, detergents, paperboard, drugs, paints, printing ink, leather tanning chemicals, rubber, adhesives, sealants, and many other goods. About 12 percent of production in the early 1990s was exported.

In 1995, weak demand, low prices, stiff competition (especially from cheaper Asian products), and new styles of clothing brought the U.S. dyes industry to a ten-year low. Prices throughout the gum and wood chemicals industry dropped substantially in following years. The U.S. Census Bureau estimated that the industry shipped about $506 million worth of hardwood charcoal and charcoal briquettes in 2002, $74 million worth of crude tall oil, and $204 million worth of other gum and wood chemicals.

However, the value of shipments in the gum and wood chemicals industry, which includes wood distillation products, has risen since the turn of the century. Shipments totaled $921 million in 2000, rose to $942 million the next year, increased further to just over $1.0 billion in 2002, and were almost $1.2 billion in 2005.

Current Conditions

Demand for gum and wood chemicals increased 7.8 percent between August 2007 and August 2008. Unfortunately, raw material costs and foreign competition steadily eroded charcoal manufacturing. The forest product industry, on which charcoal production heavily relies, went into decline, followed by sharp increases in energy that also had adverse effects on the industry.

Natural methanol (wood alcohol) was the top industry performer with shipments totaling $304.3 million in 2008. Wood extract products generated $14.5 million, while natural extracts (dyeing or tanning) had revenues of $10.5 million.

In March 2009, U.S. shipments of chemical products fell roughly 13 percent compared to the previous year, and chemical manufactures blamed the ongoing economic downturn for their slump. Although the industry as a whole was feeling the recession, some sectors fared better and others worse, such as manufacturers of paints, coatings, and adhesives that fell some 12 percent, while chemical producers of pharmaceuticals and medicines shipments grew 0.2 per cent. At any rate, the downturn in the chemical business directly affected the gum and wood chemicals industry.

Industry Leaders

Among companies that make gum and wood chemicals as their primary business, Royal Oak Enterprises Inc. of Roswell, Georgia, was one of the leaders in the mid-2000s, with 400 employees and estimated sales of $61 million. Royal Oak was the largest privately owned charcoal manufacturer in the world, and it made more private label (store brand) charcoal than any other company. Hickory Specialties Inc. (a subsidiary of Brentwood, Tennessee-based Bob Evans Farms Inc.) also specialized in charcoal. It had 150 employees and estimated sales of $29 million. Campfire Charcoal Company Inc. of Jacksonville, Texas, had 65 employees and estimated sales of $20 million. Campfire was a subsidiary of Arrow Industries Inc., which is part of the ConAgra Inc. conglomerate.

Kingsford Manufacturing Co. of Glen, Mississippi, subsidiary of The Clorox Company, manufactured charcoal, generating approximately $230,000 annually with two employees. Royal Oak Enterprises Inc. ranked second behind Kingsford in charcoal production. Arizona Chemical Co. based in Jacksonville, Florida; Prismatic Dyeing & Finishing, Inc., of Newburgh, New York; and Grove Charcoal Co. of Cedar Grove, Wisconsin, were also industry players.

Workforce

This industry employed 2,008 people in 2004 with a payroll of $86 million. The total workforce had been about 3,500 people in the early 1980s, dropped below 2,500 in the early 1990s, and has hovered around 2,000 ever since. Industry employment reached 2,943 workers in 2008.

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