March 24, 2005

Nippon Paper Chemicals to Withdraw from Brine Electrolysis Business

Nippon Paper Group
Nippon Paper Chemicals Co., Ltd.

Nippon Paper Chemicals Co., Ltd. (President: Akira Machihara) of the Nippon Paper Group announces its decision to withdraw from the brine electrolysis business as of the end of March 2006.

The brine electrolysis business of the company started in 1961 at Iwakuni Mill of former Sanyo Pulp Co., Ltd. (now Nippon Paper Industries Co., Ltd.), where chlorine and caustic soda were manufactured from brine. Since then, the business has performed well, taking advantage of the fact that Iwakuni Mill is Japan's only in-house manufacturer of these products among pulp and paper manufacturers.

The adoption of ECF (a bleaching method that does not use chloride gas) has however moved forward at kraft pulp manufacturing plants in the pulp and paper industry, as a means to bolster environmental conservation measures. Nippon Paper Industries has also decided to adopt ECF at Iwakuni Mill, in January 2006.
Moreover, demand for liquid chlorine declined about 2% each year between 1993 and 2003. Given these circumstances, it would be extremely difficult to develop a new sales channel for excess liquid chlorine brought about by the adoption of ECF at Iwakuni Mill. The company consequently decided to withdraw from the brine electrolysis business.
It is planned to purchase liquid chlorine from outside sources for the manufacture of chlorinated polyolefin.