Lanxess to transfer plant to Weifang
By Xie Ye (China Daily)
Updated: 2004-09-29 09:30

Lanxess, a spin-off company of the chemicals and polymers division of German giant Bayer, is to transfer a big hydrazine hydrate plant from the United States to East China's Shandong Province.

Lanxess yesterday signed an agreement to set up a joint venture with Weifang Yaxing Chemical a chemical conglomerate in Shandong to relocate the facility and manage production in Weifang.

Leverkusen-based Lanxess holds 55 per cent in the joint venture, while Yaxing has 45 per cent.

It is the first joint venture of Lanxess since it finished the regrouping of Bayer's chemical and polymer business in July.

Hydrazine hydrate, an intermediate agent for chemicals, is widely used in agro- and pharmaceutical industries, water treatment and plastic additives.

In a separate deal, Lanxess has sold an ADC production facility to Yaxing, says Axel C. Heitmann, chairman of the Board of Management of Lanxess.

Yaxing will apply the facility to produce foam plastics which is used for shoes, furniture and cars. Heitmann declined to elaborate on the deal.

According to the agreement yesterday, Lanxess and Yaxing will dismantle its hydrazine hydrate plant one of the largest in the world in Baytown, Texas, in December, and reassemble it in Weifang.

The joint venture is expected to commence production by the end of 2005. Initial production capacity will reach 12,000 tons a year, one of the largest in the world.

And production will rise to 14,000 tons, depending on market demands, said Chen Huaseng, chairman of Yaxing Group, yesterday.

Heitmann said the relocation would help Lanxess better serve the world's fastest growing market in China, especially when demand elsewhere is declining.

Chemical consumption in China has maintained strong momentum in the past decade.

Chemical consumption maintained an annual increase of 10 per cent from 1994 to 2001.

The market, accounting for 7.5 per cent of global consumption, is now the second largest in Asia after Japan.

The hydrazine hydrate market, in particular, has been expanding at 10 per cent a year.

And the market is likely to grow by 15 to 20 per cent annually, according to Yaxing's Chen Huaseng.

At present, domestic manufacturing is too small to satisfy the growing market, providing ways for the new joint venture to gain the upper hand over the competition, executives said yesterday.

"The joint venture will make us one of the leading players in China," said Heitamann.

Last year China started a probe into dumping allegations concerning imported hydrazine hydrate.

Should a penalty on imports be finalized, Chen's joint venture would benefit because it can be produced more cheaply locally compared to imports.

Chen said Lanxess has chosen Weifang to relocate the production facility because it wants to take the advantage of the cheap energy and raw materials, such as sea salt, alkali and urea.

The joint venture would also help Yaxing extend its business chains to middle- and downstream chemical industries such as foam plastics, Chen added.

Heitmann also said yesterday that the company is looking for every opportunity to expand its presence in China, including tailoring other facilities to growing markets in Asia, especially in China.

The new joint venture is Lanxess's fourth chemical production facility in China.

The others are in Shanghai, Qingdao and Wuxi, producing colour pigments, additives for rubber and mineral oil industries and leather chemicals.

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