BASF PAPER CHEMICALS: STRATEGIC INVESTMENTS FOR A SUCCESSFUL FUTURE

BASF plans to expand its paper chemicals business with a comprehensive investment program costing around 520 million euros by 2004. Of this sum, 130 million euros will go into research and development, while the rest (390 million euros) will be spent on expanding existing capacity or building new plants in Europe, the NAFTA region, Asia and South America. Addressing journalists in Ludwigshafen today , Dr. Wolfgang Sauer, Head of BASF's European Paper Chemicals business, mapped out the company's paper chemicals strategy:

"On the one hand, we are aiming for a lasting improvement in the profitability of our operations through lower production costs, something that will be achieved through innovations in process technology. On the other hand, we want to expand our business in northern Europe, NAFTA and Asia through organic growth, and by bringing new and innovative products onto the paper chemicals market".

In 1999 BASF sold 700 million euros worth of paper chemicals worldwide. Europe accounted for nearly 60 percent of sales, NAFTA for 23 percent and Asia for 14 percent. Most of the paper chemicals BASF produces - process chemicals, dyes and coating dispersions - go into the paper making and finishing segments of the market. Most sales are generated from our paper-coating products, followed by process chemicals and dyes.

BASF is investing nearly 180 million euros in Europe, with the main emphasis on products for paper coating, particularly styrene-butadiene and styrene-acrylate polymer dispersions. This segment of the market is growing at 6 percent annually, double the rate for paper making as a whole.

BASF is currently building a new plant at its Ludwigshafen site capable of producing 210,000 metric tons paper-coating dispersions a year. The plant should begin production this year; at the same time, older plant will be decommissioned. The new plant, which employs BASF's own technology, will create competitive advantage through lower production costs.

A further cost-optimizing measure concerns the BASF site at Arnheim in the Netherlands. This site, which to date has mainly been responsible styrene-butadiene dispersions, will switch to producing specialties.

As has already been announced, BASF plans to establish a new production site at Hamina in Finland. There, a new plant with a capacity of 140,000 metric tons will start producing paper-coating dispersions from 2002. Expansion of the site to produce other paper chemicals is also planned.

BASF's decision to set up in Finland should significantly improve its position in northern Europe, a region where some of the world's largest paper companies have their operations.

The Finnish plant is an important part of BASF's production strategy for coating dispersions in Europe: in Ludwigshafen the new 210,000-metric-ton plant will supply the central European market, the restructured Arnheim plant will produce high-value specialties, and Hamina will be key to increasing the company's market share in northern Europe.

BASF also wants to grow its business through new products. Two chemicals, polyvinylamine (PVAm) and its starting material vinyl formamide monomer (VFA), will play a particularly important role. It was in Ludwigshafen that the technology for the commercial-scale production of these products was first developed. Construction of a 8,000-metric-ton plant for the monomer and a 60,000-metric-ton plant for the polymer has already begun. The sum invested in these projects amounts to some 50 million euros. Production is due to start in 2001.

PVAm is a very versatile product. Important uses are the removal of undesirable substances during paper making or for producing polymer-modified starch, a substance that strengthens the paper more effectively. BASF expects PVAm to generate additional sales of 100 million euros in five years.

BASF produces coating dispersions, dyes and process chemicals in the NAFTA region, which is a mature market for paper chemicals. By investing nearly 140 million euros up to 2004, BASF aims to concentrate on dispersions and dyes in this market. Capacity for polymer dispersions at BASF?s Monaca site in Pennsylvania is being increased by 100,000 metric tons and will be available in the coming fall.

At present BASF wants to concentrate on strategically important product lines such as coating dispersions in the rapidly growing markets of Asia. Planned investments, mainly in Japan, Indonesia and China, will amount to 60 million euros by 2004.

As a result of its investments, BASF expects worldwide sales of its paper chemicals to climb to 1.3 billion euros by 2007.

BASF is the only globally active company producing chemicals for both the production and coating of paper. The paper chemicals business is part of BASF?s Dispersions Division, which in 1999 achieved sales of 2.3 billion euros. Aside from paper chemicals, the division also produces acrylic acid, acrylic monomers, polymers for adhesives and paints, and superabsorber.

BASF Corporation, 3000 Continental Drive North, Mt. Olive, NJ 07828-1234. Tel: 800-669-2273; Fax: 973-426-2610.