LANXESS to Build Butyl Rubber Plant

Specialty chemicals group LANXESS is to build a butyl rubber production plant in with an annual capacity of up to 100,000 metric tons. It is due to be commissioned in 2011. Dr. Axel C. Heitmann, Chairman of the Board of Management of LANXESS AG, announced the decision at a press conference in .

The plant will be constructed in the Tembusu Cluster of Jurong Island , a man-made island of around 3,000 hectares to the southwest of . The investment project is worth some EUR 400 million, making it the largest ever in the history of LANXESS.

“LANXESS is already one of the market leaders in the butyl rubber business, which is of strategic importance to us,” said Ron Commander, head of the Butyl Rubber business unit at LANXESS. “This new production plant in is in response to the growing demand for this product. The booming economic region of Asia is playing a particularly important role in this. Our sales to customers in this region have risen by around 45 percent since 2004.”

was chosen following a detailed analysis of a wide range of location factors. “Probably the overriding argument in ’s favor is the excellent availability of raw materials for butyl rubber production,” explained Commander. For example, LANXESS has secured supplies of the key raw material through a long-term contract with Shell Eastern

Petroleum (Pte) Ltd. before construction has even started. From 2010,

Shell will supply Raffinate 1 – a product created through butadiene extraction – by pipeline from its butadiene extraction unit on

neighbouring Bukom Island , which is part of the Shell Eastern

Petrochemicals Complex (SEPC). Pieter Eijsberg, General Manager of

SEPC, said: "We are delighted that LANXESS has chosen Shell as a significant partner in its expansion plans, and this agreement clearly underlines the industry's confidence in our C4 business."

LANXESS will extract isobutene, necessary for rubber production, and will also market the byproduct, Raffinate 2, externally. LANXESS also aims to conclude long-term supply agreements with Asian producers for isoprene, the second raw material for butyl rubber production, of which much lower volumes are needed.

The JTC Corporation, a statutory board under the Ministry of Trade and

Industry of the government, has allocated LANXESS an attractive site on Jurong Island , covering approximately 20,000 square meters. Relevant agreements are due to be signed in the near future and construction is scheduled to start in 2009.

The excellent infrastructure on Jurong Island in terms of utilities and waste management and the availability of further site services are also factors in this location’s favor. The same is true of the legal framework in

, which ensures maximum patent and copyright protection for innovative production processes. The city state’s high level of training and the English-speaking environment also provide excellent conditions for the construction phase. These factors also help in the search for qualified staff to operate the plant. Following completion of the construction project, LANXESS is looking to employ over 200 staff at the new site.

LANXESS has significantly expanded its two existing production sites in

Zwijndrecht, and Sarnia, in the last two years. Once the latest expansion phase in Sarnia is completed, the company will have an annual capacity totaling 280,000 metric tons of butyl rubber from 2009 onwards.

LANXESS expects sustainable annual market growth for butyl rubber of around 3 percent in the next 15 years. Major growth areas are , and Hong Kong at around 6 percent per annum, but also , boasting more than 8 percent.

As well as regular butyl rubber itself, halogenation products from this rubber, particularly bromobutyl rubber, are increasingly important and already dominate the market. Inner liners – the innermost, air- and humidity-impermeable layer of a tubeless tire – are the major area of application for halobutyl rubber. They keep tire pressure constant over a long period. This makes vehicles safer and ensures they consume less fuel and therefore produce fewer harmful emissions. Market growth is being accelerated in particular by the expansion of radial ply tire production in Asia .

Butyl rubber is also essential for a large number of special applications, including bladders for sports balls, pharmaceutical closures and chewing gum production.

The Butyl Rubber business unit is one of the leading producers of butyl rubber, with annual sales of over EUR 500 million, and is part of the Performance Polymers segment.

H.L