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SDK to Use More Non-Naphtha Ethylene Feedstock

October 20, 2005

Showa Denko K.K. (SDK) will modify its ethylene plant at the Oita Petrochemical Complex to increase the use of non-naphtha feedstock to a maximum of 50% of the total requirement. The non-naphtha feedstock, such as natural gas liquids (NGL), gas oil, and liquefied petroleum gas (LPG), provides cost advantages over the conventional naphtha feedstock.

Major part of the modification work will be conducted during the maintenance shutdown that will continue for about 40 days as from the middle of March 2006. Final completion is scheduled for June 2006, costing approximately ¥2 billion.

SDK has taken various measures to strengthen the competitiveness of its petrochemicals business under the ongoing medium-term consolidated business plan, with actual cost reductions now expected to exceed the initial target of ¥5 billion. And SDK’s ethylene plant in Oita is already the leader in Japan in terms of the use of non-naphtha feedstock.

However, SDK wants to take additional measures in view of the increased competition with new plants in Asia and domestic producers. Thus, SDK will modify its ethylene plant to enable the use of more diversified types of raw materials, increasing the percentage of less expensive non-naphtha feedstock.

Furthermore, SDK will modify the compression and refining lines of the ethylene plant to improve efficiency. This will increase the Company’s ethylene production capacity by 24,000 tons a year.