Dr. Ulrich Koemm, Member of the Board of LANXESS AG. News release. Ceremonial Act "80 years of iron oxide from Uerdingen" Friday, September 1, 2006

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1 News release Ceremonial Act "80 years of iron oxide from Uerdingen" Friday, September 1, 2006 LANXESS Deutschland GmbH Contact: Udo Erbstößer Corporate Communications Trade & Technical Press Leverkusen Germany Phone Fax Address by Dr. Ulrich Koemm, Member of the Board of LANXESS AG "Innovation and iron oxide" (Please check against delivery) ( e)

2 Good morning, ladies and gentlemen. I am delighted to be able to talk to you here today on the occasion of this important anniversary. Page 1 of 12 ( e-1) It makes me proud to represent a company whose roots extend so far back into the past. It was in Building L 7, not far from here, that the production of iron oxide pigments began on an industrial scale in And it makes me even prouder to be able to say that iron oxide pigments belong not just to the past, but that they also promise economic success in the future for LANXESS and for the Uerdingen site. Many of the present and former employees here today have contributed to this promising future with innovative processes, new applications, and improved products. LANXESS is number 1 in the world for iron oxide pigments, technologically and economically, and we will do everything we possibly can to keep it that way. I am also proud because I myself was part of the inorganic pigments team for many years of my professional career. In 1992, I became Production Manager for Pigments and Ceramics at Bayer, and took over as Head of the Inorganic Pigments Business Unit in I took iron oxide pigments with me into the Coatings & Colorants Business

3 Group in 1999, and then to Bayer Chemicals in Iron oxide pigments have always had a hold on me - even today. Page 2 of 12 Our pigments have a tradition and a future. In this connection, let me emphasize how much our customers have contributed over the years to making Uerdingen's iron oxides so successful. ( e-2) As representative of many others, I would once again like to mention the firm Harold Scholz & Co. GmbH, a much esteemed partner from the very beginning. It was an honor for me to be allowed to give a speech four years ago at the company's centenary in Cologne, and I am delighted that you, Mr. Scholz, have honored us with your presence today.

4 Page 3 of 12 ( e-3) Ladies and gentlemen, Let me begin, on behalf of LANXESS, by officially congratulating all of you in the Inorganic Pigments business unit on your anniversary. IPG, which is currently headed by Mr. Schmitz, is an important cornerstone for our company. As part of the Chemical Intermediates Segment, it makes a significant contribution to the sales and earnings of our organization. Strategically, too, the chemistry is right: LANXESS is a globally operating chemical company, which is another reason why the international pigments business fits outstandingly well into our portfolio. The IPG business unit with its main site here in Krefeld-Uerdingen proves that, despite all the prophecies of doom, it is still possible to successfully run a major operation with chemical products from Germany. At present, nearly 1,900 people are working here in Uerdingen for LANXESS, around one third of them in Inorganic Pigments. This is more than half the business unit's total workforce.

5 Page 4 of 12 ( e-4) Without modernization and restructuring, a success such as this would be impossible over the long term. For this reason, we have invested more than 115 million euros here in Uerdingen alone since 1995 in addition to the normal maintenance costs of around 165 million euros. Together with projects abroad, our capital expenditures in the field of inorganic pigments have amounted to 440 million euros during the last decade. We have, however - and I do not want to conceal the fact - also recently ceased pigment production in New Martinsville in the United States. This decision was absolutely necessary, as we can today supply the North American market more reliably and more economically from Germany and Brazil. It is pointless to try and retain small, unprofitable capacities. In large-scale chemical production, there is a certain amount of continuity in several respects. We must become continuously more efficient. At the same time, the demands of our customers and the markets are constantly changing, which means that our products and production processes must be subjected to continual change.

6 Page 5 of 12 ( e-5) Facing up to these challenges requires a very special kind of innovation. At first glance, this has little to do with the traditional idea of research and development. Industrial innovation is far more varied. It extends from fundamental research in the laboratory, through product and process development to new logistics systems, new applications and new business models. ( e-6) In 2005, LANXESS spent around 1.4 percent of sales on research and development, equivalent to about 100 million euros. We are of the firm

7 opinion that this amount is sufficient if it is used judiciously, effectively and responsibly. For this reason, research at LANXESS is in the hands of each individual business unit. The people in IPG, for example, know best of all what their customers want, where there is need for improvement and which trends are worth pursuing. Page 6 of 12 Our strategic concept also includes basic research carried out by our collaboration partners at universities and institutes. We ourselves concentrate on the improvement of products, applications and - particularly important in IPG - production processes. In addition, we develop new applications for existing products and new products for existing applications, as you can see here. Ladies and gentlemen, Let me give a few examples of how closely the success of iron oxides has been linked to such innovation - and still is. ( e-7) Iron oxide was an innovative product from the very beginning. In 1925, Dr. Julius Laux discovered a process for turning a useless by-product from aniline production into a technically useful, and later much soughtafter product. This was certainly not a trivial event, because as early as 1914, attempts had been made in Uerdingen - at that time without

8 success - to convert iron oxide slurries into something that was usable, and, above all, saleable. It was Laux who finally solved the problem. Page 7 of 12 He and his colleagues pursued an extremely interesting business idea from both the economic and ecological point of view long before there was any talk of production cycles, production-integrated environmental protection or sustainability. They recognized the fact that less waste means greater economic efficiency. The basic patent of 1925 was only the beginning. In eight decades, the company has been awarded 330 patents in the field of iron oxides. This sounds like a lot for what is basically a fairly simple product, so I would now like to show you a few examples of the type of innovations we are talking about. ( e-8) As Mr. Schmitz has already told you, micronized pigments were introduced in This signaled the breakthrough for pigment applications not only in paints and coatings, but also in plastics and synthetic fibers. The new pigments could be dispersed better and more easily than before, and also had higher color strength and color consistency.

9 Micronized pigments are based on a particularly effective technology for grinding the iron oxides in a continuous process into particles of reproducible size. The resultant products have a narrow particle size distribution on the order of one to seven-tenths of a micrometer. Basically, all the pigment particles are of similar size. Page 8 of 12 The process involves the use of what are known as steam jet mills. The big challenge here, in fact, was to transfer the technology to an industrial scale. The milling chambers have now reached a diameter of up to 130 cm with a throughput of several tons an hour. It was a case of "tiny particles on a giant scale". ( e-9) One process innovation from the more recent past affects the calcination process mentioned at the beginning for iron oxide red. Since the times of Julius Laux, iron oxide red has been produced in rotary kilns from black pigment precursors. These rotary kilns are giant pieces of apparatus with a large hold-up and a long dwell time. In 1999, we began to anneal iron oxide pigments in circulating fluidized beds. Circulating fluidized beds of this kind are well known in power plant engineering for the production of energy, but in chemical production, they were still virgin territory. In contrast to the incineration

10 of ground coal, it is a far more complicated and demanding task to work with a swirling product, and to isolate it at the right time and in the right composition. It therefore took some time before we had a stable process. But now we do: We can anneal products by oxidation - red - and even by reduction - black, and we can precisely regulate the temperature and dwell time. Page 9 of 12 Now for a completely different example: At present, around 240,000 tons of iron oxides leave the plant in Uerdingen each year. This is equivalent to nearly ten million 25 kg bags, around 30,000 a day. With manual filling, this would be impossible to cope with, even though some of the products today leave the site in Big Bags or silo tanks. ( e-10) Since 1995, the business unit has been working with numerous automatic filling units in which the robots do the work, extremely reliably and around the clock. Each of these units can fill around one million bags a year. This may sound trivial at first, but the development was not. Iron oxide produces dust and is magnetic, which adversely affects any control system. Only through sophisticated technology and because the robot

11 design could be adapted to the specific task in hand can the automatic filling process now function truly automatically. Page 10 of 12 Let us move from the process engineering to the products. Many iron oxide pigments, as you have heard from Mr. Schmitz, do not have unlimited stability. On heating, we basically end up with a red pigment. With yellow pigments, the color already begins to change just above 180 C. The color loses its brilliance and becomes dirty. Such pigments in this form are therefore unsuitable as colorants for baking enamels or for plastics that are processed in melt at elevated temperatures. ( e-11) In 1997, the introduction of our Colortherm pigments made a deep impression on the yellows. The idea was really quite simple. By using a special coating process to envelop every individual pigment particle with a non-porous and therefore water vapor-impermeable layer of silicophosphate, it is possible to significantly delay or prevent the splitting off of water on heating the pigment. As a result, the pigments can now safely withstand much higher temperatures. The principle of this innovation involves enclosing the pigment in a mini pressure tank similar to a pressure cooker. The resultant heat-stable yellow pigments are suitable for the formulation of powder coatings, for example.

12 Page 11 of 12 ( e-12) My last example is a true application innovation. It shows that iron oxides can be much more than just - and I use the word "just" cautiously - colorants. Specially manufactured iron oxide granules and pellets can adsorb inorganic impurities dissolved in water and filter out undesirable components such as arsenic and heavy metals like lead, cadmium or chromium. From this idea, the research team at IPG has, together with industrial partners, developed a system for water treatment. Bayoxide E33 is marketed throughout the world by Severn Trent Services, a leading technology provider for water and wastewater treatment. The process has proved itself in practical application in the U.K., where the natural arsenic content in drinking water is quite high in a number of regions. The arsenic content is reduced significantly below the new threshold of 10 micrograms per liter that took effect in Europe and the United States in There are already several pilot plants in operation in the U.S., too.

13 Page 12 of 12 ( e-13) Ladies and gentlemen, Innovation goes much further than we probably think. R&D is no longer confined to laboratories and libraries; it is practiced in the production plants and workshops, in our customers' facilities, and during day-today operations. It is this kind of innovation that makes such a big contribution towards keeping products from Germany competitive. On top of this, we make absolutely no compromises with regard to our responsibility for mankind and the environment in terms of sustainability and Responsible Care, neither in Germany nor anywhere else. Our iron oxides have a long tradition and they are outstanding products. We have a wide-ranging portfolio, and the satisfaction of our customers is and will remain paramount. For all these reasons, I look to the future of iron oxides and the production site of Krefeld-Uerdingen with enormous confidence. We will meet again here for the centenary. I am looking forward to it. Thank you. Forward-looking Statements This news release contains forward-looking statements based on current assumptions and forecasts made by LANXESS AG management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.