This report is organized to focus on the following sections:

Of these, the two most important pines are P. massoniana Lamb and P. elliottii Engelm, whose oleoresin production is estimated at 70%, and 20-30%, respectively of the total PRC oleoresin production.

Table 3-2. Distribution of pine species in China.

3) Chemical Components of Chinese Pine Species

The above list of pines provides oleoresin with varying chemical components of direct significance to the subsequent use of the oleoresin in its downstream applications. The four main Chinese pines - and Minus massoniana Lamb in particular - all provide an oleoresin that is high in alpha-pinene and low in beta-pinene. The sesquiterpene content is relatively very high and its constitution is various. The content of langifolene can reach to 2.5-6.4%. The diterpene content in the oleoresin is below 60%. The difference in chemical components means different utilities of pine resources in the world.

The comparison of the chemistry of Chinese pine and European and American pine is shown in below table.

Table 3-3. Distinction between chemical characteristics of oleoresins from pines in China, USA and Europe (in % of total terpenes)

4. Government Management on Pine Resources

Prior to 1998, the pine resources industry was under the administration of Ministry of Forestry. After the restructuring within the departments of former ministries, the former Ministry of Forestry has been downgraded from a Ministry to a Bureau and is now as the Forestry Office, which is responsible for plantation, preservation and fire fighting of forests.

At the moment, there are many departments in central government who each takes partial responsibilities on pine resource management, these departments include: State Resources Administrative Committee, State Foreign Economic & Trade Committee, etc.

So far there is only one regulation concerning pine resources, the "Regulation on Oleoresin Tapping" which covers the utilization and preservation of pine resources, as well as details of oleoresin tapping. This regulation was introduced in 1967 and is still in place nowadays.

According to this regulations pine trees intended for tapping must have grown to a minimum trunk diameter of 20cm. For P. massoniana Lamb to reach 20cm in diameter under normal conditions it must grow for at least 20 years.

After P. massoniana Lamb reaches the 20 cm limit it will normally be able to be tapped for ten years provided it is tapped in accordance with the regulation. Interestingly most pines will not be left standing for 20 years, for the demand in other commercial applications (e.g., lumber or pulp) will often cause them to be harvested at young age. Therefore most peasants begin to tap oleoresin when pines reach 14-15 cm in diameter (i.e.,16-17 years old).

Other relevant regulations on exploitation of pine resources are:

1) The Forest Law of People's Republic of China

Came into force on 1st July 1998. Deals with the cultivation, preservation, import and export of forestry products, including pines.

2) Law of Preservation of Wild Animals & Plants of P.R.C

Came into effect on 1 Jan. 1997, dealing with the preservation of wild animals and plants.

3) Regulations on preservation of Wild Animals & Plants of P.R.C

Explanation and implementation of the details of Law of Preservation of Wild Animals & Plants of P.R.C.

4) International Protocol on Endangered Wild Animals & Plants

China is a signatory to the Convention of International Trade of Endangered Species.

5. Collection and Purchasing Behavior of Oleoresin

The majority of the pine resources in China is essentially wild forest with only a few managed plantations. Some 10% of the forest land is owned by the State and the balance 90% owned collectively by the villages on the land. However, the system for allocation of the exploitation to these resources is controlled at the county government level which not only benefits from taxation but also has the responsibility for environmental matters.

The resin tapping, collection and transportation from the forest is manual, labor intensive work typically carried out by peasants. Mechanized transportation is often extremely limited.

Forest land is leased by the county government to peasants (for about RMB1/tree/year) to collect the oleoresin. Peasants may also sub-lease their allocation to other peasants to collect the resin. Occasionally, factories will employ peasants to collect the resin from lands under their management.

In most provinces, the season for collecting gum oleoresin is from April to November, and the peak season is from June to September because during the warmer, wetter climate the content of resin is higher and collection is easier. In the drier, colder winter the temperature is so low that the resin solidifies in the trees.

The oleoresin collected is sent to collecting stations located in communes. The users of the oleoresin, principally gum rosin factories, purchase from the communes.

The oleoresin collection is highly labor cost and it is carried out by the local peasants who have not other sources of income but oleoresin collection. This situation means that oleoresin collection is an important daily support for them, and, on the other hand, will be less competitive for them if there are other good choices of income. Anyway, the oleoresin collection brings quite a lot of financial support for local government.

Gum rosin factories are mostly state-owned and are often major contributors of tax revenue to local governments. Sale and purchase taxes are levied on every kilogram of oleoresin bought and sold (regardless of the profit or loss of the rosin producers); and VAT, profit taxes and other miscellaneous taxes in some areas may account for up to 37% of county government revenues. As a result, the oleoresin collection become a good income source for the local government while the rosin factories that consume the oleoresin shares little or none profit from the processing of oleoresin. E.g.., Wuzhou Rosin Factory, the largest gum rosin manufacturer in China, has to pay 17 kind of various tax to the local government. They almost pay RMB1,600 tax for one ton of gum oleoresin. Then it is not strange that the total price of oleoresin, including tax, goes to about RMB4,000/Mt in mid 1999.

6. Production & Pricing of Oleoresin Over the Years

1) Oleoresin Pricing

The selling price of oleoresin is directly affected by the market price for gum rosin. At historic high gum rosin prices in 1997 of around RMB6-7/kg, peasants collecting oleoresin could make up to RMB50/day. However by May 1998 when the price of gum rosin had fallen to RMB3/kg, peasants could only make around RMB20/day.

The significance of these numbers lies in the fact that for most peasants oleoresin collection is one of a number of choices of how to use their labor. If the financial returns on resin collection are too low then collection can come to an abrupt halt as the peasants use their labor elsewhere. If that suddenly far fewer people are collecting oleoresin, wide fluctuations in the supplies to the gum rosin (and turpentine) industries will happen.

At the moment, oleoresin collecting is still an important income for the local peasants in the mountainous area of Guangxi province, Guangdong province and Fujian province. Every year from April when the collecting/tapping season is coming, peasants in the above mentioned areas go to their business. But the present problem is that the price of oleoresin is still quite low for the mountainous peasant, for the unprofitable manufacturers can not offer much price. This is the main difficulties in collecting the oleoresin.

Usually the price of oleoresin is about RMB2,000/MT when the peasants sell it to the gum rosin factories. It should be pointed out that after the manufacturers buy the oleoresin, the cost of oleoresin becomes about RMB3,500-4,000/Mt. This is due to the high levies on this native product by the local government.

Table 6-1. The price of oleoresin (from peasant) in the past

*Note: the price of oleoresin in the end of 1998 seemed unreasonable. This was caused by the high price of gum rosin at that time and the short supply of oleoresin.

2) Oleoresin Production

Figure . Flow chart for processing of oleoresin (omitted)

In the processing of gum rosin, 1,000kg of oleoresin can be distilled to yield around 770-800kg of gum rosin and around 120kg of gum turpentine.

The annual oleoresin production in China is around 500,000-600,0000Mt. The actual figure may be a little higher than that, saying about 700,000Mt/year. Although most oleoresin purchasers will report the activity to the central government, there are still some volume that are excluded from the statistics.

Table 6-2. Oleoresin production in the past seven years in China

7. Production and Pricing of Gum Rosin Over the Years

1) Gum Rosin Pricing

The price of gum rosin has been fluctuating periodically during the past few years. It was once RMB6,000/MT in 1997 but fell to RMB4,000-4,500/MT in Sept 1998. Then it began to rise. By end of 1998, it came to RMB5,700-5,800/Mt. The price of gum rosin started to fall down once again till to RMB4,500/MT in August 2000.

Table 7-1 Price of gum rosin in the past three years

2) Production of Gum Rosin

The majority of gum rosin is produced in Guangxi and Guangdong provinces where the pine resources are plentiful.

There are two main factors affecting the production of gum rosin. One is climate situation. Another is the oversea demand. The growth of pine for oleoresin tapping needs mild climate, with no much drought and no much water during the collection season. E.g., in year 2000, there is less water in big provinces of Guangdong and Guangxi. This means that even if the peasants collect oleoresin from May as they usually did, the oleoresin production will still not as large as that of in year 1999.

As state earlier, the actual yield of gum rosin from oleoresin is 77%-80%. Following the discussion above, it is estimated that the production of gum rosin is as follows:

Table 7-2. Production of gum rosin in the past few years

The above table shows that the production of gum rosin increased in general trend. Apart from Europe, the main contributing influence in the expansion of gum rosin production over the last several years has been the rapid general development of the Far East Asian economies. Production of rosin rose approx. 60% between 1991 and 1997 in response to increased demand from the burgeoning Asian markets and Europe.

The Asian economic crisis that has impacted the economies of Japan and Korea since mid-1997 had once resulted in reductions in demand for basic industrial chemicals. But a various data showed that the demand from these areas for gum rosin during the Asian Crisis had not been affected. In fact it has been growing in the past few years and will continue, at least maintain at the present figure (please refer to the Export of Gum Rosin). But the price of gum rosin was severely affected by the Asian Crisis. E.g., prices for gum rosin halved from their July 97 peak of RMB7500/MT to a low in May 98 of below RMB3500/Mt. Prices for the raw material, oleoresin, were also strongly affected. With oleoresin prices so low collection was also severely reduced which lead to a shortage of oleoresin for gum rosin production. But unexpectedly the oversea demand was still large, which made the gum rosin short of supply at the end of 1998. The price of both gum rosin and oleoresin roared up at that time, as shown in the above tables.

8. Export of Gum Rosin

1) Import and Export of Gum Rosin in the Past Years

Comparing with the export, the import of gum rosin is quite small in quantity. So in this report we will focus on the discussion of export situation, and situation in 2000 in particular.

Table 8-1 Import & export of gum rosin in the past years

2) Export Situation of Gum Rosin in General

Generally about 60-80% Chinese gum rosin is exported, i.e.. about 250,000-300,000Mt/year including gum rosin derivatives.

Every year the central government will publishes a certain quota for the gum rosin. The quota is mainly limited to the primary form gum rosin instead of the gum rosin derivatives in order to control the export quantity, because the profit from the production of primary form gum rosin is quite little, some exporters would like to lower the price in order to get the order. The aim of quota policy is to protect the native industry and prevent the vicious competition among the Chinese exporters. Generally the annual quota for gum rosin is about 230,000-270,000 tons. The central government sells the export quota to those exporters who offer the higher price.

From 1994 to 1999, the most of export quota has been gained by 12 exporter (foreign trading companies) in China. They are:

• xxxx Import & Export Company
• xxxx Import & Export (Group) Company
• xxxx Import & Export Company
• xxxx Import & Export Company
• xxxx Company
• xxxx Import & Export Company
• xxxx Import & Export Company
• xxxx Import & Export Company
• xxxx Co., Ltd. (Holding)
• xxxx Import & Export Company
• xxxx Import & Export Company
• xxxx Import & Export Company

It should be noted that these active foreign trading companies all locate nearby the production base of gum rosin.

Generally the export quantity in these foreign trading companies account to about three fourth of the total export quantity of gum rosin.

Table 8-2. The role of the 12 active gum rosin exporter in China

Comparatively the central government does not control the export of gum rosin derivatives. Instead, Chinese government encourages the export of gum rosin derivatives. The export quantity of gum rosin derivatives is about 20,000-30,000Mt/year.

Every Year about 50% of gum rosin from China is exported to Europe. The rest is exported to Hong Kong, Japan, Korea, and Taiwan. It should be noted that most of gum rosin to Hong Kong is transported to the other areas of the world. In these countries the gum rosin is used to make basic commodities such as paint and ink.

Table 8-3. Export destination of gum rosin and its derivatives in 1994-1999 (unit: 1,000Mt)

3) Export situation of gum rosin in 2000

- Approach Method for the Export Analysis in 2000 (Omitted)

- Breakdown by countries

According to the statistics from China Customs in 2000, the majority of gum rosin was exported to Japan, Netherlands, Spain, France, USA, etc. The quantity to the top 11 countries (with quantity of 5,000Mt above) accounts to 90% of the total export quantity of gum rosin in 2000.

Table 8-4 Export of of gum rosin in 2000 - breakdown by destination countries

- Breakdown by active exporters

Customs statistics shows that there are 17 exporters in 2000 whose export quantity in 2000 exceeded 500Mt. These exporters share about 85% of the total export market in China. Among them the largest one is Guangxi Chemical Import & Export Wuzhou Company whose export quantity accounts to 10% of total Chinese export in 2000.

Table 8-5. Export of gum rosin in 2000 - breakdown by active exporters

- Breakdown by trade ways (omitted)

9. Brief Introduction to the Consumption of Gum Rosin in China

As shown before the annual production of gum rosin is about 400,000-450,000Mt. Among them about one third is consumed within China to to make soap, paper sizing, paint, ink, synthetic rubber, adhesive, etc. The rest is exported or made into derivatives and then exported also. It is forecasted that the domestic demand for gum rosin and its derivatives has been growing in the past few years, especially in the fields of tackifier resins, paper sizing, etc.

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