Showa Denko K.K. (SDK) Begins Construction of Second Magnetic Alloy Plant in China.

Tokyo, Japan, Aug 24, 2006 - (JCN Newswire) - Showa Denko K.K. (SDK; TSE: 4004) today began construction of a second rare-earth magnetic alloy plant in China at Ganzhou, Jiangxi Province, for start-up in the latter half of 2007. A ground-breaking ceremony was held today at Ganzhou for the new plant which will produce, with SDK's advanced quick-cooling technology, 2,000 tons/year of neodymium (Nd)-based alloys for high-performance magnets.

The new plant will be operated by Ganzhou Zhaori Rare Earth New Materials Co., Ltd., a newly established joint venture with Tokai Trade Co., Ltd. of Japan and two Chinese rare-earth mineral producers, namely, Ganzhou Qiandong Industrial (Group) Co., Ltd., and Ganxian Hong Jin Rare Earths Co., Ltd. Upon completion of the new plant, SDK will begin producing 3,000 tons/year of Nd-based magnetic alloys in China, together with its existing 1,000-ton/year plant in Baotou, Inner Mongolia.

In addition to Nd, the new plant at Ganzhou will be able to use dysprosium (Dy) and terbium (Tb), the chemical elements that ensure high magnetic force for automotive magnets used at high temperatures. Dy and Tb are produced from ion-adsorption ores found only in such southern Chinese provinces as Jiangxi, Guandong and Fujian. The two Chinese partners in the JV are leading rare-earth mineral producers, having ion-adsorption ore mines and operating separation/purification and smelting facilities.

In 2002, SDK established Baotou Showa Rare Earth Hi-Tech New Material Co., Ltd., and began operating its first Nd-based magnetic alloy plant in China. Demand for Nd, Dy and Tb is continuing to grow. At the same time, it is feared that their prices would increase further and their exports would decline substantially due to China's restriction of production, suspension of the refund of value-added tax, and cut in export licenses. Under the circumstances, SDK is strengthening its production capacities inside China so as to ensure stable supply of high-performance Nd-based magnetic alloys.

Nd-based magnets are being used in voice coil motors of hard disk drives, magnetic circuits of medical-use magnetic resonance imagers (MRIs) and in cellular phones. In addition, demand for Nd-based magnets is sharply increasing in recent years for use in hybrid cars and electric power steering devices. Thus, demand for Nd-based magnets is expected to grow at an annual rate of 15% or more in coming years.

Under the ongoing medium-term consolidated business plan, the Passion Project, SDK is allocating much of its resources to operations in the Electronics segment. SDK is committed to providing advanced products meeting customer requirements by securing stable supply of raw materials and developing new technologies.

References

* Rare-earth element:

The name given to any of the group of chemical elements with atomic numbers 57 (lanthanum) to 71 (lutetium) plus scandium (At. No. 21) and yttrium (At. No. 39). These 17 elements are obtained as by-product of titanium- and iron-ore production. They are found only in limited areas of the world, such as China, Australia and India. Out of these rare-earth elements, Dy and Tb are used in magnets, phosphors and magneto-optical memories. Nd is the main raw material for neodymium-iron-boron magnets that provide high magnetic force.

* Ion-adsorption ore:

An ore containing yttrium and europium, used in phosphors, as well as Nd and Dy, used in magnets. Found in the Jiangxi, Guandong and Fujian provinces, China.

* SDK's advanced quick-cooling technology:

The technology for producing high-performance magnetic alloys by way of high-speed quenching of molten rare-earth raw materials on a water-cooling roll. This technology enables the formation of a fine structure of cast materials.

* Voice coil motor:

A motor widely used for the positioning of an HDD head and the zooming of a camera lens.

About Ganzhou Zhaori Rare Earth New Materials Co., Ltd.

Location:        Industrial Park, Ganzhou Economic & Technology
                 Development Zone, Jiangxi Province, China
Establishment:   August 2006
Reg.capital:     JPY 900 million
Ownership:       SDK 80%; Tokai 10%; Ganzhou Qiandong Industrial (Group) 5%;
                 and Ganxian Hong Jin Rare Earths 5%
Business:        Production of Nd-based magnetic alloys (2,000 tons/year)
Market:          High-performance magnet manufacturers around the world
Employees: u@u@u@Approx. 70 (including two Japanese resident
                 representatives)
Annual sales:u@u@JPY 4-5 billion yen (plan)
Chairman:        Tadahiro Hashimoto (Senior Chief Technologist, SDK)
General Manager: Nobuhiko Kawamura (General Manager, Production Department,
                 Electronics Materials Division, SDK)
Schedule:        Start of construction work: August 2006
Mechanical completion and start of trial runs: July 2007

Outlines of JV partners

                         Established     Business    Capital (yen mil.)

Showa Denko K.K.                1939     Chemical             110,400
Tokai Trade Co., Ltd.           1981     Trading                   10
Ganzhou Qiandong
 Industrial (Group) Co., Ltd.   2000     Rare earth production 1,400
Ganxian Hong Jin Rare
 Earths Co., Ltd.               2001     Rare earth production    200

About Showa Denko K.K.

Showa Denko K.K. ('SDK') (TSE: 4004; US: SHWDF) is a major manufacturer and marketer of chemical products serving a wide range of fields ranging from heavy industry to the electronic and computer industries. SDK makes petrochemicals (ethylene, propylene), aluminum products (ingots, rods) electronic equipment (hard disks for computers), and inorganic materials (ceramics, carbons). The company has overseas operations and a joint venture with Netherlands-based Montell and Nippon Petrochemicals to make and market polypropylenes. In March 2001, SDK merged with Showa Denko Aluminum Corporation to strengthen the high-value-added fabricated aluminum products operations, and is today developing next-generation optical communications-use wafers. For more information, please visit www.sdk.co.jp.

Source: Showa Denko K.K.

Contact:

Showa Denko K.K.
Nobuhiro Kato
[e-mail]
[phone]

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