Pcr may-june-2019

1May-June 2019 PINE CHEMICALS REVIEW
MAY–JUNE 2019
TRUE
G
RIT
IN
CHIN
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KO
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O

May-
June 2019
Volume 129,
Number 3
PUBLISHER
Pine Chemicals Review, LLC
EDITOR
Will Conroy
EDITORIAL ADVISORY BOARD
Alex Cunningham—Brazil
Alan Hodges—United States
Francis Pound—United Kingdom
Don Neighbors—United States
Mariana Ferreira—Portugal/Spain
Alessandro Visconti—Switzerland
Zhang Ruifen—China
PANEL OF REFEREES
Dr. John Heitmann
Dr. James Russell
PRODUCTION MANAGER
Laura J. Sanders
ACCOUNTS MANAGER
Carol Helmstetter
CIRCULATION MANAGER
Debbie Helmstetter
PINE CHEMICALS REVIEW
(ISSN 1520-0191) is published bi-monthly by
Pine Chemicals Review LLC, Editorial & Ex-
ecutive Office at 3803 Cleveland Ave., New
Orleans, Louisiana 70119, U.S.A. Telephone
(504) 482-3914, FAX (504) 482-4205,
e-mail: info@pinechemicalsreview.com
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POSTMASTER send change of address to
PINE CHEMICALS REVIEW, 3803 Cleveland
Ave., New Orleans, LA 70119. Subscription
rates for six issues of PINE CHEMICALS
REVIEW $110 domestic and $145 for interna-
tional. Copyright 2019
Covering The Pine
Chemicals Industry Since 1890
r e v i e w
FEATURE: KOMO, China’s No. 1
4
6
8
22
PINE CHEMICALS REVIEW is editorially directed to producers and proces-
sors of pine gum and wood naval stores; producers and processors of pulp
chemicals such as black liquor, soap skimmings, tall oil and turpentine;
and producers and processors of pine derivative chemicals for the adhe-
sives, coatings, printing ink, paper chemicals, flavor and fragrance, solvent
and household products industries.
Industry News | Environment
Industry News | Pine Chemicals
Industry News | Adhesives
This Industry in 2007
TABLE OF CONTENTS
10
PHOTO ABOVE: Mengqi Ding interviewed KOMO chairman Guangjian Zeng. The going’s
not been easy for the company during its first 25 years of existence, but, Guangjian, with
his “Never say die” spirit, believes the enterprise is yet to hit new heights.
COVER: Design by Laura J. Sanders

4 www.pinechemicalsreview.com
INDUSTRY NEWS
A
massive bark beetle out-
break in the Czech Re-
public, driven by climate
change, last year reached unprec-
edented proportions. The area of
spruce monocultures destroyed in
the Central European country was
equivalent to around 100,000 soccer
fields, according to think tank Czech
Forest. The hot, dry summer and
drought meant a beetle infestation
across 18mn cubic meters of spruce,
more than 10 times amounts seen
in previous years, according to the
Czech Agriculture Ministry.
Czech Forest noted that last year
saw three generations of bark beetle
across the country, instead of the usu-
al two as the lack of rainfall weakened
trees’ defenses. For this year, much will
depend on what levels of rainfall even-
tuate, but forecasts for an infestation of
from 20mn to 30mn cubic meters (the
country has 480mn cubic meters of
ENVIRONMENT
BARK BEETLE OUTBREAK DESTROYS “100,000
SOCCER FIELDS” OF SPRUCE IN CZECH REPUBLIC

OPPOSITE TOP: A manually debarked spruce trunk positioned as a defense against bark
beetles. Image: Neptuul, Wiki Commons.
OPPOSITE BOTTOM:The European spruce bark beetle (Ips typographus) is a species in the
weevil subfamily Scolytinae. Image: Wiki Commons.
spruce timber in total) are circulating
among the expert agencies.
“Eighty percent of Czech spruce
forests are at high risk of dying,” Ja-
romir Blaha, a forest expert at Hnuti
Duha (Rainbow Movement), a Czech
environmental NGO, told Reuters in
late April. “Most of our spruce mono-
cultures in lower and mid-laying areas
will probably disappear, in years or in
a few decades.”
In excess of half of Czech for-
ests are made up of Norwegian
spruce, host to the European spruce
bark beetle.
In Central Europe, the bark beetle
disaster is not confined to the Czech
Republic. Slovakia, northern Austria
and Bavaria all have significant prob-
lems, forcing landowners to fell broad
swathes of forests in efforts at con-
taining the spread of the insects.
When it comes to Austria and Ba-
varia, however, experts acknowledge
there have been smarter, faster efforts
at adapting to climate change. That can
meanplantingfewerspruces,addingin
various broad-leaved tree species and
planting in stages to develop a multi-
aged, diverse forest. But even for the
Austrians and Bavarians, the efforts
may not be enough to get on top of the
crisis. Rain, dammit, rain!
ABOVE: Galleries in wood made by
European spruce bark beetles.
Image: Tõnu Pani, Wiki Commons.

PINE CHEMICALS
AZELIS STRIKES DISTRIBUTION DEAL WITH DRT
G
lobal speciality chemicals
and ingredients distribu-
tor Azelis has announced a
distribution agreement with Dérivés
Résiniques et Terpéniques (DRT), the
French manufacturer of rosin and tur-
pentine derivatives.
The new partnership, effective
1 October, will secure the direct and
exclusive distribution of tall oil fat-
ty acids (TOFA) and distilled tall oil
(DTO) throughout Europe, with the
exception of Spain and Portugal, into
the chemicals and lubricants markets.
The agreement follows the ter-
mination of the partnership between
Ingevity and DRT.
Javier Miranda, Market Seg-
ment Manager Lubricants & MWF at
Azelis EMEA, said: “With this part-
nership, Azelis can grant continuity
in the supply of European sourced
TOFA (Resinoline® BD-2) and DTO
(Resinoline® BD 25-30) into the mar-
ket. Customers will have access to
the same products, with no change in
product quality, whilst continuing to
liaise with the same commercial con-
tacts within Azelis.”
EricMoussu,DirectorSales&Mar-
keting at DRT, added: “Azelis’ extensive
market knowledge and application ex-
pertise in pine chemicals were key fac-
tors in the decision making.”
Azelis said the collaboration,
based on “hub and spoke” distribu-
tion with short lead-times, would
strengthen its commitment to sus-
tainability by offering products from
natural origins in the different mar-
kets of application. In combination
with the company’s lab capabilities in
Europe, this would aid customers in
developing sustainable solutions for
their current and future needs. Azelis
added the pine chemicals market seg-
ment to its business in 2014.
The Azelis group was established
in 2001 through the merger of Italy’s
Novochem and France’s Arnaud. The
groundwork for the enterprise nowa-
days known as Azelis was laid by Dr.
Hans Udo Wenzel in 1996 when he
acquired Italian distribution compa-
ny Organa. In the following years, Dr.
Wenzel pursued his ambition to cre-
ate a large, international distribution
network by acquiring Chemplast in
1998 and Novaria Chemicals and Gul-
lio Gross in 1999.
PHOTO: Azelis, which added the pine chemicals market segment to its business five years ago,
offers customers in Europe lab capabilities in application expertise.

PHOTO: The top five U.S. pine chemical facility states—Georgia, South Carolina, Louisiana, Florida, and Arkansas—are all located
within advantageous proximity of Savannah Port and the transloading facility.
ADVANCED RAIL TRANSLOADING FACILITY IN SAVANNAH
TO SERVICE EXPANDING PINE CHEMICAL INDUSTRY
C
argo Logistics Internation-
al has opened an advanced
rail transloading facility in
Savannah, Georgia, designed for bulk
liquid transloading with a direct em-
phasis on servicing the pine chemical
industry market.
“The growing need in the south-
east [of the U.S.] to handle the in-
creased volume of pine chemical im-
ports and exports is the main reason
we chose Savannah for our transload-
ing facility,” said Chad Rundle, CEO
of Cargo Logistics International. “Our
Savannah facility is equipped to han-
dle a vast array of chemicals and bulk
liquids with the utmost focus on both
service and safety,” he added.
Rundle also noted: “Given the top
five U.S. pine chemical facility states
are Georgia, South Carolina, Louisi-
ana, Florida, and Arkansas, all locat-
ed in such proximity of the Savannah
Port, Cargo Logistics International is
proud to have chosen Savannah and
the GA Port as its home for our chem-
ical transloading facility.
“We feel our facility compliments
the ongoing rail expansion efforts by
the GA Ports Authority, offering ad-
ditional rail transloading services for
both imports and exports in an area
where transloading capacity had previ-
ously reached its limits. Business in the
southeastern states is growing and we
are here to help ensure it continues.”
The pine chemical industry di-
rectly contributes to the U.S. economy
with over $1.92bn in shipments while
covering more than 19 states and em-
ploying over 1,900 workers, as report-
ed by the Bureau of Labor Statistics
and American Chemistry Council.
The industry supports $11.2bn in
downstream economic output and
over 18,700 workers in downstream
customer industries.
Transloading services offered at
the facility include Railcar to Flexi-
tank/ISO Tanks/Tanker Truck and
reverse transloading, with compa-
ny-owned dedicated bulk liquid chas-
sis and trucks for haulage between
transloading and the Savannah port.
Setting Records in Growth
The Savannah port continues to
set records in growth, according to
numbers released by the Ports Author-
ity at the end of 2018. In a recent press
release, Griff Lynch, the Ports Author-
ity Executive Director, reported that a
strong economy and an expansion of
the port’s rail capacity have contribut-
ed to the area’s continued growth de-
spite the concerns surrounding global
trade disputes. Additionally, the Cen-
sus Bureau has reported steady growth
over the past decade specifically in
pine chemical exports.
Cargo Logistics International’s
transloading facility is located less than
one mile from the Port of Savannah.
Kerri Kemp, the company’s Chief Op-
eratingOfficer,said:“Ourstrategicloca-
tion reduces drayage times to and from
the port, along with increased efficien-
cy in railcar turnaround time, reducing
bottom-line costs for our clients.”
Kemp added: “The increased
shipping challenges that exporters
face today, such as driver shortages
nationwide and congestion/capacity
issues for liquid transloading in Hous-
ton and other Gulf ports, have made
the Savannah port an ideal alternative
for shippers. Due to the competitive
pricing of Savannah’s rail and ocean
freight services, we now have prod-
ucts being railed in for transloading
from as far away as Canada and Texas.
In addition, we’ve found our prompt
transloading service and the varied
carrier options out of the Savannah
port are granting better options to
shippers than previously routed cargo
via the Gulf or the North East.”
The Cargo Logistics International
Savannah transloading facility has an
18-railcar capacity on site with 36 ad-
ditional railcars holding capacity with
Norfolk Southern coupled with a ded-
icated bulk liquid truck fleet and com-
pany-owned bulk liquid chassis.

Initial Color
Traditional Rosin Ester Altatac 1000
Color, Gardner (molten) 3 max
Color, Gardner (diluted) 1.8 max
Acid number, mg KOH/g 15 max
Initial Color
Color, Gardner (molten) 3 max
Color, Gardner (diluted) 1.8 max
Acid number, mg KOH/g 15 max
Traditional Rosin Ester
Altatac 1000
Ingevity
5255 Virginia Avenue
North Charleston, SC 29406
800 458 4034
ingevity.com
Color Stability—Resin Heat Aging at 160 C (Gardner Color, Molten)
Request a Sample
End-Use Applications
Traditional Rosin Ester
Altatac 1000
Initial 24 Hours 48 Hours
3.8
2.5
4.2
6.26.2
8.0
Contact us at chemicals@ingevity.com or visit our website to request a sample.
Technical assistance is provided for optimization of adhesive formulations
utilizing Ingevity’s products.
Altatac 1000 is a premium tackifier designed for increased stability in
thermoplastic hot melt adhesives. Ideal applications for Altatac 1000 include:
¡ Pressure-sensitive adhesive tapes and labels
¡ Hygiene
¡ Rigid packaging
¡ General industrial
September-October 2018 PINE CHEMICALS REVIEW 15
Discarding the metal gutters has
environmental and safety pluses and
minimizes damage to saw mill blades
that are impaired after metal gutter
parts remain embedded in the tree at
the point of maturity when it is cut
down for timber.
In terms of resin production, the
early months of 2018 brought the
breakthrough. Tappers using the natu-
ral gutter method have been collect-
ing 500 grams of resin from each cup
every two months, a volume which is
good for a resin project of Montigny’s
size according to Diedericks.
Once a cup is full, the resin is
scooped out into a 20-kilogram buck-
et. That bucket is carried to a nearby
collecting point within the forest
where the resin is put on a filter and
is squeezed with metal brooms into a
180-kilogram drum.
“We send this crude resin directly
to our customers in South Africa and
other markets for refining and further
processing,” says Diedericks.
The use of the natural rather than
metal gutter in resin tapping enables
Montigny to book savings each two to
three months when tappers collect the
resin and move up the cup for a repeat
of the process.
However, there is a downside to
the use of the natural gutter. Instead of
using one nail to firm the resin cup on
the pine tree, the tappers use two nails.
A process that replaces the nails with
wire is being implemented.
“We are of course moving away
from the use of nails to wire to mini-
mize incidents of nails being left in
the tree whenever the tapping process
is complete and the pine tree is ready
for cutting either at the saw mill or for
charcoal making,” notes Diedericks.
The shift to wire does not come
cheap. Montigny will require several
hundreds of kilometers of it to cater for
all its 1.2 million pine trees.
In pine forest blocks where nails are
still in use, a group of rangers armed
with metal detectors goes through ev-
ery tree earmarked for cutting to be sure
Montigny was facing high costs caused by regular damage to metal gutters. It has switched to natural
gutters created from pine tree bark using a simple cutting tool. Photo courtesy Montigny.
ADHESIVES
ABOVE: The superior color stability as indicated by
the bar graph is said to not compromise adhesive
performance. The product is also sold on the merits of its
low color in adhesive applications.
Initial 24 Hours
48 Hours
COLOR STABILITY—RESIN HEAT AGING AT 160 C
(Gardner Color, Molten)
INITIAL COLOR
INGEVITY’S BIO-BASED TACKIFIER
“STAYS LIGHT AND ADHERES TIGHT”
I
ngevity has introduced a premium bio-based tackifier
that “stays light and adheres tight”. Altatac 1000 is de-
signed for increased stability in thermoplastic hot melt
adhesives and demonstrates “outstanding initial color and
color stability compared to traditional rosin esters,” accord-
ing to the company.
Ingevity exhibited Altatac 1000 resin at the Adhesive
and Sealant Convention and Expo held in April in Phila-
delphia, Pennsylvania. Based on tall oil rosin chemistry, the
new adhesive is said to provide a superior bond on surfaces
that are difficult to adhere to. It is promoted as maintaining
its adhesive quality after extended heating.
“We understand the importance of low color in adhe-
sive applications,” said Kim Meidl, Ingevity’s Global Busi-
ness Manager, Adhesives. “Altatac 1000 provides custom-
ers with an environmentally friendly, low-color alternative
that won’t compromise adhesive performance. This prod-
uct is ideal for applications where color stability and bond
strength matter most, such as hygiene and rigid packaging.”
In its press release on Altatac 1000, Ingevity also not-
ed how rosin-based tackifiers provide superior adhesion to
difficult-to-bond-to surfaces such as recycled corrugated.
The product is a “bio-renewable resource that allows
adhesive companies to differentiate their product lines, and
promote sustainability to end users,” Ingevity added.

ADVERTISE WITH PINECHEMICALSREVIEW.COM

The company has six factories
in five provinces of China, namely in
Guangdong, Jiangxi (two factories),
Hunan, Guangxi, and Yunnan. Each
facility owns different kinds of forest-
ed lands and plays various roles in the
operation of the business. Since 1994,
KOMO’s products have been exported
to more than 30 countries.
Back in 1994, Guangjian Zeng,
the chairman of KOMO, left his po-
sition as a research technician at the
Institute of Chemistry of the Chi-
nese Academy of Sciences in Guang-
zhou, southern China. Not long after
in the city, he established the first
KOMO Group pine chemicals com-
pany. Three years later, De Fan, who
was also a research technician at the
Academy, joined him and the pair de-
cided to develop the new company
together. “We just wanted to make
some difference with our technical
skills,” Guangjian told PCR.
One of the first products of the
KOMO company was hot melt adhe-
sive based on research conducted by
Guangjian and De. Guangjian recalls:
“During those years, the Chinese hot
melt adhesive companies were main-
ly founded by people who’d left their
jobs at transnational corporations,
one of which was [H.B.] Fuller. Since
KOMO sold its products to Fuller at
that time, those people knew from dif-
ferent channels that our hot melt ad-
“No.1 manufacturer of gum rosin in China”, “Leading manufacturer of rosin resin
in China”, “No.1 manufacturer of turpentine oil in China”, “Biggest importer of
gum rosin in China” … KOMO, the flagship of the Chinese pine chemicals industry,
is not short of flattering tag lines. But as far as KOMO’s management team is
concerned, the company still has new peaks to aim for. It does not want to end
up flattering to deceive.
KOMO’S CLIMB TO THE TOP HAS BEEN PRECARIOUS AT TIMES BUT
THE CHINESE PINE CHEMICALS COMPANY IS STILL FOLLOWING IN THE
FOOTSTEPS OF GIANTS, AMBITIOUS TO BECOME AN …
Mengqi Ding caught up with company chairman Guangjian Zeng,
heard the history and took a look behind the scenes.
INDUSTRIAL
LEGEND

hesive and some other products were
the main materials in Fuller’s formula.
Therefore, after they left Fuller, they
contacted KOMO and used our prod-
ucts for their own companies.”
As a result, KOMO did not face
an arduous challenge to expand its
market share. Moreover, it became
the first company in China to pro-
duce rosin for hot melt adhesive. And
with the high profits generated by the
booming hot melt adhesive industry,
the company thrived rapidly.
On the overseas market, it was sty-
rene-isoprene-styrene (SIS), that drew
the attention of foreign companies to
the newborn company. Self-stick pres-
sure-sensitive adhesives (PSA) are an
important element in making nonwo-
ven fabrics and hygiene product ma-
terials. To manufacture PSA, plants
need to utilize both SIS and hydrocar-
bon resin. According to Guangjian, the
hydocarbon resin mainly came from
Exxon, Eastman Chemical, Idemitsu
Kosan and Zeon. However, SIS was a
rarity all around the world. To solve
this, Sinopec introduced polysty-
rene-block-butadiene-block-styrene
(usually abbreviated as SBS) as a sub-
stitute. It was Chinese yuan renminbi
(CNY) 20,000 ($2,400) per ton cheap-
er than SIS.
SBS, however, had a deficien-
cy. PSA could be produced from it
with the input of super-expensive
gum-rosin derivatives. On the other
hand, if SBS is used with cheaper hy-
drocarbon resin, the PSA loses its ad-
hesiveness very quickly. Given this re-
alisation, the SIS producers filled the
production gap and won out. KOMO’s
SIS, meanwhile, also defeated a few
rival products from Arizona Chemical
(now part of Kraton) on its aroma.
As time went by, KOMO’s renown
spread across many countries through
transnational corporations that had
branches in China. “Fuller has been
collaborating with us since 1995, and
Henkel built a partnership with us as
early as 1996. Then, we brought the
SIS to the domestic market,” Guangji-
an relates, with some pride.
Nowadays, KOMO boasts a di-
verse range of pine chemicals prod-
ucts that it has developed, such as the
KS water-white rosin ester, KA and
KF tackifier resin, KB cost-effective
resin, KH hydrogenated rosin resin,
KL liquid resin, KX printing ink resin,
KP phenolic resin, KT terpene resin,
KZ coating resin and disproportionat-
ed rosin. It has become a global sup-
plier of adhesives, inks, and paints.
Under the guidance of Guangjian,
KOMO Group’s 10 subsidiaries, six
factories and five production bases
have grown to collectively own 73.3
square kilometers of pine forests and
are devoted to research, production
and sales activities. KOMO products
go to the U.S., South America, Aus-
tralia, Europe, and the Middle East,
among other destinations.
But KOMO feels it has only
reached a plateau. It wants to take
bigger strides to secure a new era.
OPPOSITE: KOMO’s factory in Yunnan
Guangjian in a KOMO-owned forest.

THE TOUGH ROAD AHEAD
The development of KOMO
was neither inevitable nor smooth.
Several stumbling blocks have
hindered KOMO, one of which,
says Guangjian, is hydrocarbon
resin, which in fact remains a big
challenge for the entire gum ros-
in industry in China. As the price
of gum rosin relentlessly rose, hit-
ting CNY23,000 ($3,660) per ton in
2011, the hydrocarbon resin indus-
try took in big profits thanks to its
much cheaper product and relative-
ly low production costs. These prof-
its were plowed into the industry’s
technologies, prompting an expan-
sion that was especially pronounced
after 2010. Previously, China was
only exporting 3,000 tons of hydro-
carbon resin per month. By now the
figure is 10 times that.
At the same time, Chinese
gum rosin production has fallen by
half, from 800,000 tons per year to
400,000 tons per year, and its price
continues to drop. In Yunnan, one
of the most well-known provinces
for sourcing pine chemicals in Chi-
na, the number of gum rosin fac-
tories has plummeted from more
than 70 to less than 20. Yunnan
gum rosin output has, meanwhile,
dwindled from 210,000 tons per
year to 70,000 tons. In 2014, KOMO
made a net loss of around CNY2mn
($322,000) because of the impact of
hydrocarbon resin on the market.
The challenge is real. And Guang-
jian concedes that the public per-
ception of KOMO is more generous
than the reality.
The market battle is far from
over. For one thing, gum rosin’s
reputation as a natural, renewable
product is a winning attribute.
Guangjian explains how it endows
gum rosin with a better aroma and
scores higher marks for safety in
usage. Consequently, some hygiene
products must be made with gum
rosin. Hydrocarbon resin is not re-
Data from Rosineb (www.rosineb.com)
250,000
200,000
150,000
100,000
50,000
0
2007 2008 2011
TONS
2012 20152009 2013 20162010 2014 2017
ROSIN PRODUCTION OF YUNNAN PROVINCE
Rosin samples displayed at a KOMO office

Guangjian is also optimistic about
gum rosin’s prospects on export mar-
kets. Hydrocarbon resin is a side prod-
uct drawn from the process of making
ethylene from petrochemical feed-
stock naphtha. Vast quantities of hy-
drocarbon resin are manufactured in
China by Sinopec, a company with the
Chinese government standing behind
it. That results in the extremely cheap
prices. Moreover, as a norm Chinese
fuel oil prices fluctuate according to
international crude oil prices. There-
fore, companies do not necessarily
give too much thought to the money
they make from side products such as
hydrocarbon resin.
On the contrary, observes Guang-
jian, when you look at markets abroad
you see a lack of naphtha, meaning
hydrocarbon resin production lines
are relatively scarce and prices of the
product are higher.
His analysis takes in countries
like Brazil, where the hydrocarbon
resin industry is not specially sup-
ported by a strong state-owned firm
like Sinopec. Fuel oil prices in these
countries are also kept much more
stable, with a good deal less linkage
to world crude oil prices. The govern-
ments know that any major price in-
flation might trigger unrest among the
public. Faced with this situation, pri-
vate and state-owned enterprises on
many foreign markets have to gener-
ate what revenues they can from side
products such as hydrocarbon resin,
leading to increasingly high prices.
And in these cases, the rosin resin ex-
ported by KOMO proves competitive.
Guangjian appreciates the busi-
ness spirit seen in certain overseas
markets. He provides the example of
tall oil rosin resins used in producing
road markings. In China, he says, the
pressure is always on to cut the cost of
paved roads to a minimum. One way
garded as an option when it comes
to nonwoven fabrics, diapers and
sanitary pads. As Guangjian says,
“gum rosin can replace hydrocar-
bon resin in all areas, but hydrocar-
bon resin cannot act as the perfect
alternative to gum rosin”.
In these markets where gum
rosin is irreplaceable, the gum rosin
industry sees a good future. In addi-
tion, “gum rosin is natural. As long
as we have the sun, we have endless
supplies of gum rosin. However,
crude oil is a one-time thing. After
you mine it, you need to find anoth-
er resource, which come with in-
creasingly high mining costs now-
adays,” Guangjian points out. Lots
of hydrocarbon-based products are
thus losing their past glories, los-
ing their allure. Clean energies and
renewable resources are gradually
moving center-stage.
“Gum rosin
can replace
hydrocarbon
resin in all areas,
but hydrocarbon
resin cannot act
as the perfect
alternative to
gum rosin”.
is to add less rosin product in paints.
The Chinese industry average is 14kg
of gum rosin per 100kg of coating res-
in. “It surprised me when I first knew
that there were strict standards on
coating resin in [some] foreign coun-
tries. For example, you need to add
at least 16% gum rosin into the paints
and they have a specific percentage
for glass beads used in road marking
products too”.
Ashydrocarbonresinhaslowheat
resistance and is easily contaminat-
ed by tailpipe fumes, road markings
made with more hydrocarbon resin
often need to be repainted within one
year. That compares with the two-
year lifetime of gum rosin product
alternatives. “The rules for the game
are different,” Guangjian reflects. “In
China and Southeast Asia, people cel-
ebrate the fact that they can use cheap
materials and sell more markings
and paints because the roads need
to be redone frequently. However, in
North America and Europe, people
are proud of their roads and markings,
which can last longer and be used by
generation after generation.”
SuchanoutlookpersuadesKOMO
to give plenty of focus to the Europe-
an and North American markets. It
collaborates, for example, with the
biggest international resin coatings
company in the U.S. With the Trump
administration planning to spend a
huge amount of infrastructure money
on the construction of new roads and
bridges, KOMO has also started nego-
tiations with an American company to
supply 10,000 tons of rosin resins.
With such market diversification
and the prioritizing of infrastructure
by the U.S. and other governments,
KOMO’s chances of surviving, or even
averting, the fierce market impact of
hydrocarbon resin suddenly look that
much more substantial.

TRAVAILS OF GOING PUBLIC
When more than a decade ago KOMO
set out to obtain a listing on the stock
market, it can’t have imagined what
a terrible headache it was in for.
Nevertheless, KOMO still has more
than a fighting chance of eventually
securing its longed-for initial public
offering (IPO), In fact its efforts in
this area have become something of
a barometer for all those Chinese
pine chemicals companies who have
flotation dreams of their own.
KOMO’s IPO efforts started as
far back as 2008. After investing
CNY3mn ($440,000), the company
was poised to submit its application
the following year. The plan was to
present one pine forestland proj-
ect and a food resins project. But,
as Guangjian recollects, the effort
at achieving a stock market listing
amounted to “one long, tough road”.
Right before KOMO was ready to
submit its application documents in
2009, the China Securities Regulato-
ry Commission (CSRC) issued a new
policy. It outlined how all trans-pro-
vincial chemical enterprises applying
for listing must undergo a strict envi-
ronmental investigation to be carried
out by the Chinese Ministry of Envi-
ronmental Protection. Project testing,
an environmental evaluation and ver-
ifications conducted by a third-party
organization were all demanded. A
listing bid without the requisite envi-
ronmental checks would now go no-
where with the CSRC. Consequently,
KOMO again found itself reaching
into its pocket, investing a not incon-
siderable amount of money over 18
months to meet the requirements and
gain the certificate.
Armed with the certificate,
KOMO was back on the road towards
the desired IPO, but then a small di-
saster struck. The world market price
of gum rosin suddenly skyrocketed.
KOMO’s resin was now unaffordable
to many buyers, KOMO’s production
rate slumped and the CSRC post-
poned consideration of the company’s
IPO application.
The gum rosin price hit as high as
CNY23,000 ($3,660) in 2011, and 2012
turned out to be an even less fertile
year for progress with the IPO ambi-
tion as the CSRC suddenly announced
it would be approving no IPO appli-
cations at all that year. Moreover,
just when KOMO could ill afford any
more burdens, the company went
through an arduous financial audit in
2013 and that very same year the envi-
ronmental certificate, so determined-
ly worked for three years previously,
expired. As Guangjian went through
the gateway of the Ministry of Envi-
ronmental Protection, staff greeted
him with, “Oh, you’re here again!”
Fortunately for KOMO, its per-
sistent efforts at fighting adversity to
stay afloat were buoyed by a favorable
turn in sales across 2012 and 2013. The
company was able to present some
very attractive numbers for its second
IPO application, submitted in 2014.
Sensing a change in the air and bet-
ter pricing prospects ahead, Guang-
jian decided to stockpile as much as
CNY200mn ($32.2mn) of gum rosin.
Alas, KOMO then found itself
back on the rollercoaster. The sheer
impact of hydrocarbon resin as a ri-
val product was now being felt, and,
just after KOMO filed its new IPO
request, the gum rosin market again
experienced a steep decline. KOMO
reported its net loss of CNY2mn and
there were frowns all around. While
the threshold for a successful IPO was
rising, business was sinking.
China, contending with choppi-
er economic waters in recent years,
has exercised tighter control over fi-
nancial risks in its economy, meaning
A production plant at KOMO

fewer loans for private enterprise.
The number of financing channels
available to KOMO has diminished.
The company, says Guangjian, previ-
ously used a line of credit and added
capital of CNY72mn ($10.5mn at June
2019 exch. rate) to its books by mort-
gaging its six factories. However, the
now stricter government policy on
funding meant lines of credit were no
longer available to private companies.
KOMO was forced to seek other ways
to raise finance.
Back to that elusive IPO. If KOMO
successfully applies for an IPO, it will
be a different ball game. “Listed com-
panies can still get the lines of credit.
Plus, bankers chase after you actively
and give you long-term loans to solve
money problems. I could also draw
on national appetite through corpo-
rate bonds equity to raise lots of funds
from the market. At, for instance, 20
yuan ($2.91) per share, from 20 mil-
lion shares KOMO would obtain four
hundred million yuan (more than
$58mn) from the bonds. With that
money, mergers and acquisitions be-
come possible,” Guangjian enthusias-
tically explains.
As things stand, “the huge ris-
es and falls in Chinese gum rosin
prices are indeed hindering us and
blocking the growth of the whole in-
dustry,” says Guangjian, somewhat
less enthusiastically. He goes on:
“China ranks first among all coun-
tries that produce gum rosin. At the
peak, from 2007 to 2010, China con-
tributed 800,000 tons of gum rosin
to the 1,400,000 tons of gum rosin
produced worldwide. However, af-
ter the price of gum rosin crossed
20,000 yuan per ton, China in recent
years found itself only able to manu-
facture 400,000 tons per year, even
though it is still one of the top gum
rosin producing countries”.
When it comes to IPOs, “KOMO
could be the most unfortunate com-
pany on the Chinese market”, says
Guangjian. “We’ve adhered to the
application process for 10 years, but
failed. You cannot find another case
like us in China.”
In 2017, the CSRC thoroughly
assessed the 35 Chinese companies
applying for a flotation. KOMO was
informed it would have to go through
a second inspection. In the meantime,
KOMO’s capital chain came under
threat. Guangjian had to negotiate
with the bankers to persuade them
to grant additional loans. The road to
that IPO still seems to stretch out a
long way ahead.
Finding the strength to persevere
in company philosophy, despite those
slings and arrows of outrageous for-
tune, Guangjian talks of how “what
others see as ways to earn quick mon-
ey, KOMO sees as just one opportuni-
ty. No matter whether KOMO is listed
or not, we must operate the company
morally and effectively. We will not
make up numbers or provide fraudu-
lent information just to get listed.” By
the time of the period just after the
stressful examinations performed by
the CSRC, Komo’s could still boast
2017 profits exceeding CNY30mn
($4.6mn), passing the latest IPO min-
imum, and its capital chain remained
intact.
Besides, KOMO’s bumpy ride has
not been entirely disadvantageous.
For one thing, KOMO is significantly
advanced in terms of getting listed in
the future. CSRC committee members
are seen as responsible for the compa-
nies they endorse for a lifetime. That
makes them very cautious when re-
viewing IPO materials, and in recent
years the pass rate for companies in
China wanting an approval for a list-
ing has been extremely low. Among
the few companies that have passed
the CSRC examinations is KOMO. It
waits and persists. And the committee
KOMO’s warehouse

members tend to be quite confident about
its prospects. It has successfully under-
gone two rounds of examinations, it is the
Chinese leader in the pine chemicals in-
dustry, it is building factories and it is pay-
ing taxes in many under-developed rural
localities where pine forest resources are
abundant. It has to be very likely that the
CSRC will eventually affirm its high score
and sign through an approval for an IPO.
KOMO’s demanding IPO experience
might also help the company in complying
with rigorous policies brought in for chem-
ical industry enterprises in China. In re-
cent years, officials have closed down many
small factories seen as not meeting the new
environmental, operational safety and haz-
ardous-product standards. But for KOMO,
Guangjian sees the more stringent regula-
tion as “an opportunity”. When KOMO ini-
tiated its application for a listing, it invested
substantial sums in upgrading production
according to higher environmental and op-
erational safety demands. The tougher reg-
ulations that have proved fatal for so many
Chinese chemical companies have actually
helped KOMO by ridding the market of
lots of its competitors.
KOMO is far from giving up on its
long-term strategy. “We will continue on
this road to the IPO and the capital mar-
kets,” Guangjian states without hesitation.
KOMO’S PRICELESS FORESTS
As gum rosin prices continue to drop in China, enthusiasm for
production abates. A recently introduced policy to ban the exploita-
tion of state-owned forested lands to preserve natural resources has
not helped. Many Chinese pine chemicals companies now face re-
source shortages.
Here, however, KOMO is also ahead. The company has always
looked to itself to maintain upstream natural resources. “When we
first started, I worked on a plan of starting with the resources, while
then completing the production chain with resource gathering, manu-
facturing, deep processing, and expanding,” Guangjian says. “Our mis-
sion has always been the same—develop a good pine chemical product
series from natural resources such as gum rosin and turpentine.”
Of the three kinds of chemical materials—biological, mineral
and hydrocarbon—only the biological materials are renewable, notes
Guangjian. Artificial synthesis is expensive, so natural resources offer
KOMO a profit with the lowest costs, according to Guangjian’s thinking.
In 24 years of existence, KOMO has built up an exclusive natural
resources portfolio of pine forests covering a combined area of more
than one hundred thousand mu (66.7mn square meters). Especially
in regard to the essential and irreplaceable pine species Pinus masso-
niana and Pinus kesiya, KOMO enjoys an abundant supply within its
own forest lands. Assessing how it is that KOMO survived nosediving
gum rosin prices, Guangjian gives credit to the mass production of
high-quality resources.
In 2007, global hygiene products player Procter & Gamble, both-
ered by regular crude oil price hikes, advocated replacing petroleum
materials with natural materials. The multinational collected samples
of natural resin from its main suppliers, including Bostick, H.B. Full-
er, Henkel, National Starch, Eastman Chemical and KOMO. The first-
round evaluation determined that only three submitted samples out of
12 met the requirements. One was from Eastman Chemical, while the
Guangjian (Middle) and his KOMO team

KOMO UPS
ANCHOR FOR
ANOTHER STAB AT
ITS IPO DREAM
Despite multiple setbacks, KOMO
says it remains determined to place an
initial public offering (IPO).
KOMO, which commenced its efforts
to secure a stock market flotation as far
back as 2008, in June this year restarted
its IPO application. The company,
founded in 1994, is eying a listing on the
Shenzhen Stock Exchange’s small-cap
Growth Enterprise Market (GEM), often
known as ChiNext, which debuted in
2009 to such enthusiasm that trading
was briefly suspended on its opening
day. It is mostly government enterprises
that list on the Shanghai and Shenzhen
main exchanges in China’s multi-tier
capital market structure.
To date, KOMO’s business and listing
plans have not been caught up in the
growing exchange of trade war tariffs
between the U.S. and China, says
company chairman Guangjian Zeng.
He adds that the level of interest there
will be in the offering is hard to predict.
FACTS AND FIGURES ON KOMO’S
PLANNED IPO AND ITS BUSINESS SIZE
• Proposed IPO size: Chinese yuan
renminbi (CNY) 2bn ($290.7mn)
• Proposed initial offer price per share:
around CNY 15 ($2.18)
• Starting out, KOMO is not likely to be
ranked among China’s top 500 listed
companies
• Brokerage and investment bank hired
to conduct IPO: China
Galaxy Securities.
IN 2018, KOMO, WITH A WORKFORCE OF
486 AND 60+ PRODUCTS, RECORDED
• sales revenues of $145mn
• coatings and adhesives domestic
sales volume of 47,000 tons
(category represents company’s main
product on Chinese market)
• gum rosin derivatives international
sales volume of 10,000 tons
(category represents company’s main
export product)
CHINA’S EXPORTED AND IMPORTED GUM ROSIN IN 2017
IMPORTED
EXPORTED
QUANTITY
(MT)
55,256
59,626
QUANTITY
(MT)
20.8%
-12.1%
TOTAL AMOUNT
(USD)
73,561,183
105,935,823
AMOUNT
(USD)
14%
-13.4%
AVERAGE PRICE
(USD/MT)
1,331.27
1,776.66
AVERAGE
PRICE
-5.6%
-1.4%
COMPARISON WITH THE SAME
PERIOD IN 2016 (±%)
Data from China Customs Administration
other two were from KOMO. After the secondary evaluation, only KOMO’s
samples were left. KOMO’s emphasis on high-quality natural resources
drew the experts from P&G’s U.S. headquarters to the company’s factories
in China. KOMO’s efforts in developing unparalleled gum-rosin deriva-
tives had paid off. KOMO became a strategic supplier to P&G.
In 2018, KOMO’s share of the Chinese coatings and adhesives mar-
ket stood at around 30% and the company remains the biggest Chinese
exporter of pine chemicals. KOMO exports to more than 30 different
countries. It ships around 15% of the gum rosin derivatives exported from
China. Thanks to its early recognition of the importance of owning one’s
own natural resources, KOMO has gradually taken control of the upstream
industry, securing its future.
Given the domestic gum rosin deficit, KOMO has also turned to im-
porting gum rosin. China has transformed from its status as a leading gum
rosin exporter into a big gum rosin consumer. KOMO imports gum rosin
from countries including the U.S., Brazil, Argentina, Indonesia, Vietnam,
South Africa and Russia. Around 40% of China’s gum rosin imports are
brought in by the company.
A trend of gum rosin producers moving to countries with low labor
costs—including Vietnam, Myanmar, Cambodia, Indonesia, Argentina, and
Brazil—is well under way. Guangjian names Brazil as a particularly good
example. Companies there only have to pay a pine-resin tapper around $470
per month on average. And Brazil, along with other countries including
Mexico and Argentina, have started to use their own gum rosin, instead of
importing product from China. To its existing challenges, such as defeating
hydrocarbon resin market incursions, KOMO can thus add the difficulty of
competingwithcountrieswithlowlaborandrawmaterialcosts.Thisiswhere
technologycomestothefore.KOMOsaysitismakingbigstridesinproducing
deep-processed pine chemical products. Guangjian sees products for special
applications opening up unique markets for KOMO. The opportunities lie
in fields such as surfactants, epoxy resins and organosilicon resins, where

new materials and applications could
be created. Guangjian suggests that
“as we now cannot compete with
new competitors in the raw material
costs, the only solution is technology.
Even though the emerging gum rosin
production countries trail China in
terms of technology now, once they
catch up, the challenge will become
even more serious. Therefore, the only
way is to concentrate on technology,
andtheonlywaytoenhancetechnology
is to invest both more time and money”.
In 2007, KOMO established a re-
search center specifically for develop-
ing new and outstanding pine chemical
products. Its research lab covers 1,500
square meters. The facility is replete
with a range of equipment and appli-
ances for research, development and
piloting of products. Guangjian remains
devoted to recruiting experts and talent
in the deep processing of rosin and tur-
pentinefortheresearchcenter.Arounda
thirdofitspersonnelhaveatleastaMas-
ter’s degree. The center holds 16 patents
for inventions and has many proprietary
technologies to its credit. Several nation-
al scientific research projects fall under
its remit and each year it produces four
or more new products for the domestic
pine chemicals industry.
Thanks to its new technologies
and products, KOMO has gradually
made its way to market frontiers. For
instance, in the production of elec-
tronic devices, colophony soldering
paste is indispensable in making cir-
cuit boards. Previously, the gum ros-
in used in colophony soldering paste
could only be made by Japanese com-
panies. But after painstaking techno-
logical research, colophony soldering
paste finally emerged from a KOMO
research laboratory. KOMO became
the second company in the entire
world capable of producing this spe-
cialty product, making it the pride of
the Chinese Welding Society.
Guangdong province support-
ed KOMO’s research center without
reservation. It put in funding and
shaped policies to help the company
create more unique and irreplace-
able deep-processed pine chemical
products. Guangjian feels lucky that
“among domestic companies, KOMO
is one of the few that can afford a
large investment in technology. Com-
pared with foreign-funded enter-
prises, which usually have research
centers outside of China, KOMO can
draw on a lot of convenience and
advantages. Due to its technology,
KOMO stands out.”
KOMO’s technology teams also
study imported foreign materials
from companies such as Kraton busi-
Members of KOMO’s research team
KOMO’s research lab

ness Arizona Chemicals and Ingevity.
“The foreign materials have special
strengths such as better purity,” says
Guangjian. “By learning from them, we
have gained competitive advantages,”
he adds. Guangjian remembers when
Arizona Chemicals made a big impact
on the Chinese market with tall oil rosin
sold at super-low prices. KOMO had to
respond quickly. It researched the prod-
uct’s characteristics and applications.
Nowadays, KOMO says it produces tall
oil rosin of an even better quality and
sells it at even lower prices.
“Technology is the key to success,”
reiterates Guangjian. “Natural resourc-
es can sometimes fluctuate with the
market, but technology advantages can
last for a long time. For instance, the
secret to the 140-year success of [Ja-
pan’s] Arakawa Chemical and the per-
sistent flourishing of [fellow Japanese
companies] Harima Chemicals Group
and Toho Chemical Industry is their
deep-processing technologies. Even if
they’ve needed to import most resourc-
es from China due to extremely low do-
mestic production, they’ve still become
industrial legends”. It’s an open secret
that once KOMO’s patents expire, com-
panies from all over the world rush to
learn their secrets.
If KOMO manages to list successful-
ly, Guangjian plans to invest CNY 100mn
($14.6mn) in boosting technology re-
search. Nature, with a helping hand from
science and technology, will soar, he says.
THE FUTURE BECKONS
Guangjian is optimistic about the Chinese pine chemicals market
as a whole. “With its huge consumption base, it is more likely to ma-
ture than the foreign market,” he says. Annual gum rosin consumption
in China stands at around 500,000 tons. “That does indicate that China
has transformed from a global power in gum rosin production and ex-
port to a leading country in gum rosin consumption,” Guangjian recaps.
The history books will show that the Chinese gum rosin industry
gradually took off given abundant resources and cheap labor. A few
decades back, Spain, Portugal and the U.S. made up the top three in
rosin production. As their labor costs rose, the industry moved over to
China. By the 1980s, China was already producing in excess of 300,000
tons of gum rosin annually. Spain, Portugal and the U.S. were more or
less only left with tall oil rosin. In gum rosin, China filled the gap.
“Till now, there’s hardly been any country that could replace Chi-
na in the pine chemicals industry,” Guangjian asserts. His reasoning
is that as things stand annual global gum rosin demand is fairly stable
at around one million tons. Driven by falling gum rosin prices, Chi-
nese gum rosin production has halved from 800,000 tons to 400,000
tons. But the country still holds the lion’s share of the market. No other
country can produce as much as 300,000 tons. Take Vietnam as an ex-
ample. Its rosin production is outmatched by that of Chinese province
Yunnan, even though Yunnan’s gum rosin output has tumbled from
210,000 tons to 70,000 tons.
Looked at from this angle, the development of the Chinese pine
chemicals industry remains promising. What’s more, notes Guangjian,
as gum rosin production diminishes, rosin prices will further increase
because of supply and demand dynamics. There is steady consumption
of around 500,000 tons of rosin on the Chinese market. There’s no way
the fire’s going out in the progress of China’s pine chemicals industry.
As for KOMO’s prospects, Guangjian speaks of industrial integra-
tion. KOMO has to date taken the approach of integrating management
across different factories. The integration took in activities including
purchasing, financing and selling. “The only difference between the
factories is the variety of their products,” Guangjian explains. “Based
on natural conditions, the Jiangxi province factory is the best produc-
KOMO product awaiting distribution

tion place for Pinus elliottii. Yun-
nan acts as the best nationwide
resource for Pinus kesiya, while
Guangxi is the top domestic origin
for Pinus massoniana. Some of our
factories are our deep processing
bases, whereas some other sites
mainly import gum rosin. KOMO
can be said to have an excellent
production allocation”. The di-
verse distribution of production
has its clear benefits, but KOMO
is wary of heavy management ex-
penses. Guangjian is therefore
looking into merger potential.
There’s good reason, it seems,
to bring things under one roof.
According to Guangjian, even
though KOMO ranks number one
among Chinese pine chemical
companies, its business turnover
does not compare with desired
benchmarks. For instance, Arizo-
na Chemicals’ annual revenue is
around $1.5bn and Arakawa turns
over around a billion dollars each
year. KOMO’s turnover has only
just passed $100mn. To battle with
international competitors, KOMO
needs to scale up. Mergers, or ac-
quisitions, might be the way for-
ward. Guangjian says mergers will
be KOMO’s top priority across five
to 10 years, once its IPO applica-
tion is approved. “Most Chinese
pine chemical companies want
KOMO to be listed and to become a
strong leader for the whole indus-
try,” he adds.
So where to from here? Guang-
jian mentions how lots of Chinese
entrepreneurs have been scour-
ing Africa for pine resin and “they
even formed a touring group for
Fiji”. Rosin resources from coun-
tries such as Fiji, Madagascar and
the Democratic Republic of Congo
are in fact already being shipped
to China for processing. Guang-
jian can only see more and more
rosin from Africa arriving to meet
the needs of the Chinese mar-
ket. However, Africa’s rosin out-
put does not yet exceed 100,000
tons. KOMO sometimes likes to
point out that its name can be tak-
en to stand for “Keep Our Mind
Open”, and the company is not at
all averse to considering forays
abroad. Guangjian says a deci-
sion on this will be made once the
IPO is green-lighted. Big funds
and international talent would be
needed, he adds. For now, KOMO
is marshalling its “breakthrough”
talent at home. The company re-
mains determined to follow in the
footsteps of giants.
GUANGJIAN ZENG is Chairman of
Guangzhou KOMO Chemicals Co., Ltd.
He graduated from Nanjing University of
Science and Technology in 1986 with a
bachelor’s degree in Chemical Engineering.
In 1989, he earned a master’s degree in
chemistry from South China University of
Technology. Upon graduation, he worked
at the Guangzhou Institute of Chemistry,
Chinese Academy of Sciences. In 1994, he
established KOMO. His pine chemicals-
related research has been recognized with
many important awards in China, such as
the First Prize of Guangdong Academy of
Sciences, the Second Prize of Science and
Technology Progress in Guangdong and the
Outstanding Products Awards in Jiangxi.
Currently, Guangjian Zeng is also Vice
President of the Jiangxi Rosin Association
and Committee Chair of the China
Chamber of Commerce of Foodstuffs and
Native Produce, specializing in the deep
processing of rosin.
*All provided exchange rate conversions are based on historical data unless otherwise stated.

A
global association whose members create
significant value by taking a natural renewable
resource from pine trees and providing a reliable
and sustainable supply of environmentally responsible,
high quality specialty chemicals and their derivatives
to customers worldwide. The PCA brings value to its
members and to the pine chemicals industry by providing
a focused industry-wide approach to maintain pine
chemicals commerce globally and by addressing and
reacting to regulatory, legislative or sustainability issues
impacting the industry.
“Bringing together Industry leaders
from around the world, since 1947”
PINE CHEMICALS ASSOCIATION
WWW.PINECHEMICALS.ORG
PINE CHEMICALS ASSOCIATION IS A VIBRANT, GROWING GROUP.
SUPPORT YOUR INDUSTRY AND BECOME A MEMBER.

2007THIS INDUSTRY IN
H
ow do the ancient origins of the pine chemicals industry re-
late to Noah and Moses? And why were North American pine
resources such a motivating factor in the English exploration
and colonization of the Americas? How are fish related to a big mar-
ket setback suffered by turpentine in the early 1980s and why did
consumption of pine oil in disinfectants slump? Read on …

Pcr may-june-2019

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