Lanxess AG, the spin-off company of German chemicals giant Bayer AG, will begin operations at three chemical plants in China this year in deals that would "significantly" drive its business in the regional market, its top official said yesterday.

After recording a 50 per cent growth in China last year, the Leverkusen-based company plans to start production at two new plants in Weifang of East China's Shandong Province and Tongling of East China's Anhui Province later this year, Axel Claus Heitmann, global CEO of Lanxess, told China Daily.

It announced the start-up of its 20-million-euro (US$25.6 million) plant in Wuxi, of East China's Jiangsu Province, at the end of April.

"I expect the rapid growth to continue in Asia, especially in China," Heitmann said, declining to estimate a year-on-year increase in sales for 2006.

Meanwhile, the company aims to save 200 million euros (US$256 million) in cost globally by 2008 to increase profitability, the top official disclosed. That would be achieved through a slew of restructuring programmes around its global portfolio, he added.

The company last year signed an agreement with its Chinese partners to set up a joint venture in Tongling to produce antioxidant Vulkanox, a material used to protect rubber compounds from material fatigue.

The project, which will make Lanxess the first foreign company to manufacture the chemical product in China, is expected to begin production by the end of this year, Heitmann said yesterday. It is funded by Lanxess, Tongling Xinda and Anhui Tongfeng  two local firms in Anhui.

Another chemical plant will commence production of hydrazine hydrate at Weifang this summer, he said. Hydrazine hydrate is an intermediate agent for chemicals.

The company has dismantled its former hydrazine hydrate plant, one of the world's largest, in Baytown, Texas, and is reassembling it in Weifang.

The relocation aims to take advantage of the cheap energy and raw materials in Weifang  such as sea salt, alkali and urea  according to Lanxess' local partner in Shandong, which takes the minority 45 per cent stake in the venture.

On April 27, the German chemical maker said its Wuxi engineering plastics plant began production with an annual capacity to produce 20,000 tons of plastics, with plans to add another production line in the near future.

Chemical consumption in China has maintained a strong momentum in the past decade. The market, accounting for about 7.5 per cent of global consumption, is now the second largest in Asia after Japan.

But domestic manufacturing is too small to meet the demands of the local market, providing room for joint ventures by foreign companies to gain an edge over the competition, analysts have said.

Heitmann yesterday said the company also has plans to seek merger and acquisition opportunities in China to expand its market share, after completing rebuilding of its current plants. But he refused to give a specific timetable.

Lanxess' first-quarter profit rose 17 per cent as it raised prices and sold more materials such as the rubber used in tyres and golf balls, and ingredients for paint. Sales rose 6.2 per cent to 1.84 billion euros (US$2.4 billion).

The numbers show that the restructuring programme, which aims to cut costs and increase profitability, has made good progress, industry analysts said.

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