Rubber Day Korea 2011 Jeju Island, Korea Wednesday, November 23, 2011 LANXESS AG Contact: Daniel Smith Corporate Communications Financial and Business Media Relations 51369 Leverkusen Germany Phone +49 214 30-75179 Fax +49 214 30-50691 daniel-alexander.smith@ lanxess.com Speech by Dr. Günther Weymans Head of Technical Rubber Products LANXESS (Please check against delivery) (2011-00030e)
Page 2 of 14 Ladies and gentlemen, good afternoon. More than 100 years ago, German chemist Fritz Hofmann invented synthetic rubber. This material inherently changed car travel and had a vast ripple effect on mobility as the world knew it. Today it is difficult to imagine our lives without it. Yet the development of synthetic rubber is far from over. And LANXESS experience and technological expertise makes our company a critical player in these efforts.
Page 3 of 14 We possess an extensive portfolio of high-performance products and technologies. And we are proud to have the largest selection of rubber products in the industry. This is all the result of LANXESS commitment to innovation the bedrock of our success. Our company and our people work hard to continually develop better, more sustainable processes and products. And we do so responsibly. We are working to further reduce our global CO 2 emissions in order to leave a greener footprint. This is what you our customers also want. From automakers to automotive suppliers to the tire industry, it is clear that the demand for greater environmental sustainability is here to stay. And true to form, LANXESS is listening and we are delivering. Our Technical Rubber Products business unit or TRP as we call it provides a comprehensive selection of technical rubber goods.
Our portfolio includes over 250 products that generate more than one billion euros in annual sales. Roughly 1,400 men and women around the world work in our TRP unit including some 100 technical experts who research new products and global technologies. Page 4 of 14
Page 5 of 14 But our portfolio is by no means complete. We are always working to expand LANXESS product portfolio, focusing on the development of "greener" state-of-the-art, high-performance rubbers. Allow me to share with you one of our most recent developments.
Page 6 of 14 Our TRP unit is currently producing a bio-based rubber derived from sugar cane, under the brand name, KELTAN Eco. The ethanol produced from the sugar cane is dehydrated into ethylene during production. Then, it is polymerized to make our bio-based rubber, known as EPDM... or ethylene-propylene-diene monomer. We now have the capacity to produce roughly 10,000 metric tons of EPDM rubber each year for the global market at our plant in Triunfo, Brazil. This EPDM rubber is not only used by the automotive industry, but also by the plastics processing and construction industries, and by cable producers. Moreover, our customers do not sacrifice on high quality by using KELTAN Eco. The quality of our bio-based ethylene is more than equal to that of traditional ethylene. And in keeping with our commitment to environmental sustainability, our bio-based ethylene reduces our carbon footprint, while also improving energy balance.
Currently, our KELTAN Eco rubber includes up to 70 percent of sugar cane-derived ethylene. We are working to increase this proportion to more than 90 percent over the next three to five years, once biopropylene is more readily available. Page 7 of 14 As a result, the organic content of our final product will jump from zero to between 15 and 25 percent. This will depend on the percentage of natural ethylene in the EPDM grade, and on the amount of KELTAN Eco in the final product. I think you will agree with me that KELTAN Eco is a significant development that holds new product value. But beyond investing in Brazil and our bio-based EPDM, we continue expanding our commitment to rubber development to other parts of the world. Last May, we acquired the rubber business of Royal DSM in the Netherlands for more than 310 million euros. We retained its 420 employees. Since then, our global EPDM business unit has worked from the Geleen site in the Netherlands. Construction for their new head office is scheduled to begin next spring, and will be ready by the beginning of 2013. This site aspires to be the breeding ground for continued innovation and the success of our international enterprise.
Page 8 of 14 In fact, I am pleased to report that this is already becoming a reality. We are currently in the process of switching half of our EPDM rubber production lines in Geleen to the new KELTAN ACE technology in an effort to enhance sustainability. We aim to complete this switch by 2013. By then, we will have implemented this new technology among our largest three production lines allowing us to produce roughly 90,000 metric tons of EPDM each year. There are two key advantages to implementing this new KELTAN ACE technology in our production lines: First, it reduces the cost and energy requirements to produce EPDM, when compared with other conventional technologies. And second, KELTAN ACE technology will help us to increase the range of applications for our rubber products.
We continue operating a pilot system at our Geleen site that supports the development and marketing of our KELTAN ACE technology. Our site also houses research facilities, including a state-of-the-art catalyst development laboratory and a research laboratory to study oil additives. Page 9 of 14 LANXESS is also investing in Germany, where we have dedicated 17 million euros to the capacity expansion of Baypren, our polychloroprene rubber. In keeping with our commitment to innovation, we are pairing new resource-saving technology and products with better production processing and aging behavior. And we are in the process of approving the new Baypren products with our customers. By doing so, LANXESS can consolidate our market position for polychloroprene solid rubbers a market with a global demand that is growing by roughly three percent each year. We are also investing in LANXESS sites in Germany and in the United States in order to expand our production of hydrogenated acrylonitrile-butadiene rubber or HNBR by a total of 40 percent over the coming year. Some of you may know that we market this synthetic high-performance rubber under the Therban brand name.
Page 10 of 14 HNBR is used, for example, in cars in the rubber timing belts for the engine s valve control. Unlike the usual steel chains, this rubber reduces the car s weight without shortening its service life. HNBR also reduces friction and, as a result, fuel consumption. Roughly one liter of fuel can be saved for each 1000 kilometers. This may not seem like much at first However, if you were to outfit all 4.5 million new vehicles in Korea with these rubber timing belts, the annual savings would add up to between 90 to 135 million liters of fuel.
The HNBR market is growing at a double-digit rate each year, where demand is highest in the automotive industry particularly in China and India. By expanding our production lines in Germany and the United States we are responding to this demand, and systematically advancing our growth strategy. Page 11 of 14
Page 12 of 14 Our most recent product, Levatherm F, is another interesting development for the automotive industry. This fluororubber is particularly important for downsizing engines, and for striking a balance between economical engines and excellent performance. The hoses used in these engines must be robust and extremely heat resistant. And the design of our Levatherm F is a perfect fit. LANXESS is also committed to investing in our expansion here in Asia. Several weeks ago, we began construction on the most advanced nitrile rubber production plant in Asia our Nantong site in China. LANXESS is working with the Taiwan Synthetic Rubber Corporation or TSRC on this exciting joint venture.
Together, we will start producing nitrile-butadiene rubber or NBR at the Nantong site as soon as the first half of 2012. The plant has a planned initial capacity of 30,000 metric tons of NBR annually. Page 13 of 14 Demand for high-quality NBR is increasing at an exponential rate in the fast-growing Chinese market, due primarily to the rise of mobility and urbanization. We are investing and we are working to meet this demand. Ladies and gentlemen: As you can see, this is a prolific time for our company. And these developments demonstrate that wherever our operations, in Asia, Europe, North or South America, LANXESS is taking deliberate steps to ensure meaningful growth on a global scale. LANXESS is committed to innovation to finding creative solutions that meet growing demand and to using state-of-the-art technology.
LANXESS is developing better, more sustainable production operations and products and leaving a greener footprint. Page 14 of 14 And LANXESS is delivering. Thank you all very much. Forward-Looking Statements. This news release may contain forward-looking statements based on current assumptions and forecasts made by LANXESS AG management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.