Toray to establish membrane manufacturing JV in China

Toray Industries Inc. and China Blue Star & BS Group Co., Ltd reached an agreement last week to establish a new joint company for water treatment in Beijing. The company, Toray Blue Star Membrane Co., Ltd (TBMC Co.), will focus on the manufacture & sales, and import & export of water treatment products...

BEIJING, China, Nov. 13, 2008 -- Toray Industries Inc. and China Blue Star & BS Group Co., Ltd reached an agreement last week to establish a new joint company for water treatment in Beijing. The company, Toray Blue Star Membrane Co., Ltd (TBMC Co.), will focus on the manufacture & sales, and import & export of water treatment products. The plan calls for facility construction to commence in 2009 and be completed by 2010. Business operations will begin in 2009 while the manufacturing facility is being built. This new company will be capitalized at $35 million USD (about 3.5 billion yen) and the investment amount to set up the new facility for manufacturing and assembling RO membrane is to be approximately 5 hundred million CNY (about 7.5 billion yen).

As a production facility, this new company will install casting and coating machines to produce polyamide composite reverse osmosis membrane as well as auto-winders which will assemble that membrane into elements using Toray's state-of-the art automated technology. Toray expects that after TBMC's start-up in 2010 the company's annual overall production of RO elements will see a 1.5-fold increase compared to 2008 and a threefold increase compared to 2006 when combined with production at their facilities in Ehime, Japan and Toray Membrane USA in California, USA.

The TBMC joint venture has been nominated as a project of major importance by the Japan-China government-based Save-Energy and Environment forum and the agreement between these two industrial giants will be made official during a signing ceremony at the aforementioned forum where representatives of both governments are expected to be in attendance. Both Toray Industries and China Blue Star bring important abilities to the table which will lead to the success of TBMC Co. Toray will provide the manufacturing and technological know-how necessary to make world-class membranes for wastewater, seawater, and brackish water treatment while China Blue Star will bring the vast and already established business network necessary to gain a foothold in the quickly-expanding Chinese water treatment market.

China Blue Star is a subsidiary of ChemChina and as a holding company retains the largest water treatment engineering, industrial-cleaning, and petrochemical companies in China. The company is importing and exporting water treatment membrane in China now and by establishing TBMC Co. with Toray Industries, China Blue Star Co. will show a strong commitment to the water treatment industry by addressing customer requests quickly and offering a stable supply of products. Although Toray Industries has other operations already in China, the new company will handle all sales of water treatment membrane in-country by consolidating sales people from currently operating offices in Beijing and Shanghai.

Currently, Toray is focusing on investing management resources on "strategically developing businesses" which are the key to continuing the company's expansion through 2010. In the water treatment business - which Toray top management have identified as one of these strategic opportunities -- the Toray group's sales target is 67 billion yen in 2010 and over 100 billion yen in 2015. The achievement of these targets was ensured earlier this week by the establishment of TBMC Co.

Water treatment membrane can be categorized into 4 types according to the constituents being separated; RO membrane, NF membrane, UF membrane and MF membrane. Toray is the only membrane manufacturer in the world which developed and went on to commercially produce all 4 membrane types internally. Its water treatment membranes, which can produce water with various qualities from various water sources, is important amid concerns that water shortages will become a major international issue in the coming decades.

China has an especially high rate of economic growth and is increasing its overall water use due to consistent industrial development. At the same time the demand for water in urban areas has grown with the population, and drought has ravaged the country's Northern provinces. In order to address such circumstances wastewater recycling and seawater desalination programs are being put in place and both applications will use water treatment membranes. Sales of RO membrane in China are increasing at an annual rate of more than 20% and many manufacturers of membrane are entering into China from all over the world. Toray believes that the water market in China will reach 5 billion yen in the next 5 years and aims to capture a 30% share of that market.

Other membrane manufacturers already have small manufacturing facilities in China hand-assembling elements to supply local customers. There are also a few Chinese membrane manufacturers making membrane, though it is generally considered to be inferior to the membranes made by the major international manufacturers. By Establishing TBMC Co., Toray and China Blue Star will significantly change the paradigm in China by bringing fully automated, state-of-the-art water treatment membrane manufacturing technology to China on a scale not previously seen outside of Japan and the USA.

Toray has 5 main bases (Japan, U.S.A., Europe (including the middle-east), China, and Asia Pacific) already set up to address the rapid expansion of the global water treatment market and to improve membrane quality further. Toray continues to win major projects in the Middle East, Mediterranean, Oceania, and China as well as several other major markets around the world and will continue to promote the membrane business with our world-leading membrane technology.

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