Lanxess inks Chinese joint venture deal

- Last updated on GMT

Related tags: Stock market, Lanxess

Chemicals group Lanxess - to be spun out of Germany's Bayer next
year - plans to relocate a plant in Texas to China in order to tap
into the strong growth in the market for chemicals there.

The plant relocation is part of a joint venture with China's Weifang Yaxing Chemical Co to manufacture hydrazine hydrate, which is used as an intermediate in the manufacture of medicines.

Hydrazine hydrate is sold in different concentrations, but Lanxess Yaxing (Weifang) Chemicals will be capable of manufacturing 64 per cent purity, which Lanxess said is the highest quality hydrazine hydrate on the marketplace. The facility will be the only plant in China to produce hydrazine hydrate of this quality.

The pharmaceuticals industry requires hydrazine hydrate to manufacture medicines, including those for the treatment of tuberculosis, forms of depression and hypertension.

Lanxess said it will hold a 55 per cent stake in the JV, while Weifang will hold a 45 per cent stake.

Lanxess' strongest market is Europe, and it earned around half of its total sales there in 2003. The company also has a strong presence in Asia-Pacific (16 per cent of its sales) and in the North American market, which accounted last year for around 21 per cent.

China is the fastest growing market in the world, and analysts predict that the country is set to become the world's largest chemicals market over the next few years."We are looking to achieve concerted growth in China,"​ Lanxess chief executive Axel Heitmann said.

The joint venture will be based in Weifang in the Shandong province will start supplying customers with hydrazine hydrate at the end of 2005.

In 2003, approximately 75,000 metric tons of hydrazine hydrate were processed in China and consumption is set to significantly rise in the next few years, according to Lanxess. The plant in Weifang will be one of the largest of its kind in the world.

Other suppliers of hydrazine hydrate include France's Atofina, Belgian company Brenntag, Japan's Otsuka/Mitsubishi and ChemDesign of the US.

Meanwhile, it has been revealed that Bayer shareholders will receive one share in polymers and chemicals unit Lanxess for every ten Bayer shares they own, according to the Financial Times.

Bayer intends to float Lanxess on the stock market in January 2005.

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