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SDK To Produce Rare Earth Magnet Alloy in China

September 17, 2002

Showa Denko K.K. (SDK) today signed a joint venture agreement with Inner Mongolia Baotou Steel Rare Earth Hi-Tech Co., Ltd., China Metallurgical Import and Export Corporation and Tokai Trade Co., Ltd. to start producing neodymium-iron-boron (NdFeB) magnet alloy in Baotou, Inner Mongolia, China.

The new company, Baotou Showa Rare Earth Hi-Tech New Material Co., Ltd., will be established in Baotou's high-tech industrial development zone in December 2002. Construction of a 1,000-ton/year NdFeB magnet alloy production facility will start in January 2003, for completion in December of the same year. The entire product will be sold to SDK, and annual sales of the joint venture are expected to amount to ¥1-1.5 billion.

The joint venture, with registered capital of billion, will be owned 60% by SDK, 30% by Inner Mongolia Baotou Steel Rare Earth Hi-Tech Co., and 5% each by China Metallurgical Import and Export Corp. and Tokai Trade Co.

SDK has decided to establish the facility in China to secure stable supply of the raw material Nd and to ensure the production of high-performance NdFeB magnet alloy at low cost. China accounts for more than 80% of the world's Nd production. Furthermore, Baotou Iron and Steel (Group) Co., Ltd.-parent company of the joint venture partner Inner Mongolia Baotou Steel Rare Earth Hi-Tech Co.-owns the majority of Nd mines in that country.

The joint venture, which will employ approximately 50 people including three Japanese, will be led by Tadahiro Hashimoto (Chairman) and Mitsuhiko Morihira (General Manager), both from SDK.

SDK has been producing rare earth magnet alloys in Chichibu, Japan, using its advanced quick-cooling technologies. As the leading supplier of rare earth magnet alloys, SDK is providing high-performance alloys to magnet manufacturers inside and outside Japan.

NdFeB-based magnet is the strongest permanent magnet on the market today, having stronger magnetic force than cast magnets (Alnico and others) or ferrite magnets. NdFeB-based magnet is used in voice coil motors of hard disk drives, medical-use magnetic resonance imagers, and miniaturized vibration motors for cellular phones. The new facility in China will mainly produce alloys for use in sintered magnets, rather than bonded magnets.

Demand for rare earth magnets is expected to grow at an annual rate of 15% or more in the years to come, for applications in various sectors such as the automotive, information technology, environmental goods and electric appliances industries.

In the ongoing medium-term consolidated business plan "Cheetah Project" and the subsequent business plan "Sprout Project," SDK is committed to providing highest-level technologies and products to its customers in the electronics industry. As part of this move, SDK is allocating much of its resources to the rare earth magnet alloy operation, which is defined as one of the strategic growth businesses under the two business plans.