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SDK to Invest in Graphite Electrode Company in China

Showa Denko K.K.
April 13, 2012

Showa Denko K.K. (SDK) has signed an agreement with Sinosteel Corporation (Sinosteel), of China, to acquire 67% of shares in Sinosteel’s wholly owned subsidiary Sinosteel Sichuan Carbon Co., Ltd. (Sichuan Carbon), an integrated manufacturer of graphite electrodes.  Sichuan Carbon will become SDK’s subsidiary subject to ratification by related government organizations.  SDK will introduce its technology into Sichuan Carbon to improve product quality, and expand its graphite electrode operations in China and other Asian countries.  SDK will consider the possibility of expanding Sichuan Carbon’s capacity to meet a growing demand.

Sichuan Carbon is operating a 22,000 t/y graphite electrode plant, and selling the product in the Chinese market.  When this facility is added to the existing facilities—the 60,000 t/y plant in Omachi, Nagano Prefecture, Japan, and the 45,000 t/y plant of Showa Denko Carbon, Inc. (SDKC) located in South Carolina, U.S.A.—, the Showa Denko Group’s total production capacity will reach 127,000 t/y.

Furthermore, a capacity expansion project is under way at SDKC.  After completion of the project, the Group’s total capacity involving one each plant in Japan, the U.S.A. and China, will increase to 157,000 t/y in 2014.  We have so far provided high-grade graphite electrodes produced at Omachi and SDKC to markets in Japan, the U.S.A. and the EU.  After Sichuan Carbon becomes our subsidiary, we will vigorously develop and market “volume-zone” products for emerging markets mainly in China and other Asian countries.  Thus, we will establish ourselves as a leading supplier of graphite electrodes covering both advanced and growing markets.

Graphite electrodes are used for electric steelmaking, which melts iron scrap for recycling.    Demand for graphite electrodes is expected to increase steadily, as electric steelmaking grows due to its environment-friendly features of iron resource recycling and low CO2 emissions.  The growth of electric steelmaking will also be supported by the increase in supply of iron scrap in China—the world’s largest steel producer—and other emerging economies, following the proliferation of cars and the progress in urban development.

Under the new medium-term consolidated business plan PEGASUS, the Showa Denko Group is focusing on the two business domains of “Energy/Environment” and “Electronics,” aiming to contribute toward creating a society where affluence and sustainability are harmonized.  Together with the hard disk media business, the graphite electrode business is positioned as our main business.  We are strengthening the graphite electrode business as it contributes to the sustainability of the global environment through the recycling of resources and the mitigation of global warming.  We will fully utilize our advanced technologies to further improve product quality and develop new markets, thereby expanding the business and creating added value.

Outline of Sinosteel Sichuan Carbon Co., Ltd.
Location: Guangyuan, Sichuan Province, China
Establishment: 2007
Scope of business: Production and sale of graphite electrodes
Capital: RMB126,000,000
Shareholder: Sinosteel Corporation (100%)
    After the scheduled transfer of shares:
          Showa Denko K.K.:    67%
          Sinosteel Corporation:    30%
          Tokai Trade Co., Ltd.:     3%
Number of employees: Approximately 400

Outline of Sinosteel Corporation
Location: Beijing, China
Scope of business: Development and processing of metallurgical mineral resources;
             Trading and distribution of metallurgical raw materials and products;
             Engineering services and production of equipment;
             General support for companies related to steelmaking; and others
Capital: RMB3,657,187,742 (as of April 2011)
Annual sales: RMB184,566,240,000 (in 2010)

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