Economic Importance

A 2003 report commissioned by the Formaldehyde Council, Inc. analyzed the formaldehyde product tree and traced each product to the ultimate point of consumption.  Here are highlights of the major findings for economic contributions of the formaldehyde industry to the U.S. and Canadian economies in 2003, using a narrow definition of the industry:  

  • Value of Sales: The value of sales of formaldehyde and derivative products amounted to $145 billion-plus.  This represents 1.2% of the Gross Domestic Product (GDP) of the United States and Canada.
  • Employment: The total number of workers in the United States and Canada who depend on the formaldehyde industry is four million-plus.  This includes direct employment in the industry and the indirect employment of those whose livelihoods depend on this industry.  This represents nearly 3.4% of employment in private, nonfarm establishments in the United States and Canada.
  • Wages: Total wages for all of these workers amounted to nearly $130 billion, or 1.9% of the compensation of all U.S. and Canadian employees.  
  • Value of Business Fixed Investment: Formaldehyde and derivatives production was carried out in facilities with an aggregate investment value of nearly $90 billion in the United States and Canada, representing 4.2% of the net stock of private fixed assets in the manufacturing sector. 
  • Number of Plants: There are approximately 11,900 formaldehyde and derivative plants operating in the United States and Canada. 

While there are some applications where other materials could replace formaldehyde with only a small incremental cost or performance penalty, in most instances the use of substitutes would entail significant cost increases or performance losses. Here are highlights of the major findings of benefits to consumers:

  • Consumers would have to spend an additional $17 billion per year (the equivalent of nearly $3,500 per metric ton of formaldehyde currently consumed) if formaldehyde-based products were replaced by substitute materials.  Nearly 60% of the estimated benefits are attributed to three major applications: urea formaldehyde resins, phenol formaldehyde resins, and methylenebis(4-phenyl isocyanate) or MDI.  In most cases, substitution in these end uses is very imperfect; consumers would suffer large losses in utility using alternative materials, and large new capital investments would be required to produce or utilize the substitutes.
  • Urea formaldehyde (UF) resin is one of the mainstays in the building and construction industry.  Nearly 95% of UF resins are used as binders or adhesives in particleboard and medium-density fiberboard for composite panels, roofing tiles, hardwood plywood, and coatings.  Wood products made using UF resins have predominant market shares in their main applications.  Without UF resins, consumers would be forced to use more expensive, less versatile, and less durable materials, or else switch to entirely different construction methods.   In most cases, switching to different construction methods is a significantly more costly alternative.
  • Phenol formaldehyde (PF) resin is another mainstay in the building and construction industry.  Nearly 75% of PF resins are used to make structural panels, insulation binder and laminates.  Other significant end uses include automobile applications (e.g. friction materials) and foundry binders.  Like UF resins, PF resins have predominant market shares in major applications.  Without PF resins, consumers would be forced to use more expensive, less desirable, and less versatile materials, or switch to alternative construction methods.
  • The majority of MDI is used in the manufacture of rigid polyurethane foams.  These products’ superior insulating and mechanical properties benefit their numerous construction applications.  Other MDI rigid foam applications include appliances (e.g., refrigerators, freezers, and air conditioners), packaging for high- end electronics, and transportation.  In the absence of MDI, consumers would be forced to use less effective materials and would experience significant losses of utility (e.g. inferior insulation properties, increased breakage or spoilage).