Sinofert Becomes Strategic Investor in Shandong Luxi; Agreement Includes Distribution Rights for Shandong Luxi's Nitrogen Fertilizers and Sales of Sinofert's Potassium Chloride Products.

HONG KONG -- Sinofert, China's largest integrated fertilizer company has announced a strategic partnership with Shandong Luxi Chemical Company, a major producer of chemical fertilizers.

The agreement, which was reached on June 28, brings extended marketing capabilities to Sinofert through an equity relationship with the Shandong-based fertilizer company, which is the largest producer of coal-based urea in China. Sinofert has also entered into a long-term supply arrangement with Shandong Luxi for its potassium chloride products.

Sinofert, also known as Sinochem Hong Kong Holdings Limited (HKEX: 0297) has purchased 50 million new shares of Shandong Luxi Chemical Co., Ltd., listed as an A-share on the Shenzhen Stock Exchange. The share purchase represents 4.7 percent of Shandong Luxi's equity after a new share issuance. The shares were priced at RMB 2.60 per share, a discount of 22.38 percent from Shandong Luxi's closing price of RMB 3.35 per share on June 28. Sinofert is the only fertilizer company to take part in the new share issuance. Other investors were primarily institutions.

Distribution and cooperation agreements will grant Sinofert the exclusive right to sell, distribute, and market nitrogen fertilizers produced by Shandong Luxi in Heilongjiang, Jilin, Liaoning and Jiangsu provinces, considered regions of strong market potential. Sinofert has the right to extend its geographic distribution of Shandong Luxi products. Shandong Luxi has also committed to purchase 70 percent of its input of potassium chloride, also known as muriate of potash, from Sinofert. Muriate of potash is used in the production of compound fertilizers.

Sinofert Chairman Liu Deshu said: "The strategic relationship with Shandong Luxi will help to improve Sinofert's supply chain management. Our new equity relationship brings together two of China's leading fertilizer enterprises, and will lead to synergies for both sides. Sinofert will be able to expand markets for nitrogen fertilizers, as well as obtaining a stable long-term customer for its potash products."

Sinofert's chief executive officer, Du Keping, said: "We are excited about our achievements over the past year. Over the last six months, we have made great strides in the development of an integrated business model, as well as diversifying our product mix and moving upstream into manufacturing."

Shandong Luxi is engaged in the manufacture, distribution, and technological development of chemical fertilizers and other chemical products, and is China's largest producer of urea. Its annual production capacity is one million tons of urea, 850,000 tons of compound fertilizers and 600,000 tons of complex fertilizers.

Based on its closing price on July 4, Shandong Luxi has a market capitalization of RMB 2.8 billion. Its 2005 profit was RMB 437,306,700, on revenue of RMB 3,309,998,300. 2005 profit increased 27.07 percent compared to the previous year, while revenue increased by 15.93 percent. Net profit increased by 15.93% to RMB 142,259,100 in 2005.

The strategic partnership with Shandong Luxi will strengthen Sinofert's position in sourcing and distribution. It is expected that the relationship will reinforce Sinofert's "three in one" marketing strategy of integrating the supply chain from downstream product sales to warehousing, logistics, and agrichemical services.

About Sinochem Hong Kong Holdings Limited

Sinochem Hong Kong Holdings Limited, a listed company of the Stock Exchange of Hong Kong ("SinoFert" or the "Company", together with its subsidiaries, collectively the "Group"; HKEx: 0297), is principally engaging in the fertilizer business in the PRC and overseas. By offering a variety of fertilizer and agriculture related products, the Group is a leading fertilizer enterprise and the largest importer and distributor of fertilizer products in the PRC. The Group is the flagship fertilizer company of Sinochem Corporation, which was established in 1950. Sinochem Corporation is one of the largest state-owned enterprises in terms of turnover, and a Fortune Global 500 Company. Sinochem Corporation has global operations in the oil refining, chemicals and fertilizer industries.