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Kuraray determined to move its thermoplastic polyurethane (TPU or KURAMIRON) production base from the Kurashiki Plant in Kurashiki, Okayama to the Kashima Plant in Kamisu, Ibaraki. Currently Kuraray produces 1,400 tons per year of TPU at the Kurashiki Plant. In order to respond to the growing demand, the Company decided to build a new plant that is capable of producing 2,000 tons per year of TPU. The new plant will implement operations in December 2006, and the Kurashiki Plant will cease production as the Kashima plant comes on line.

TPU is a leading material of thermoplastic elastomers. With its distinguished strength and abrasion resistance, TPU is widely used in injection molding such as shoe soles and extrusion molding such as tubes and belts. In addition, it is applied as a substitute for flexible PVC in gripping materials. Increasing demand for solvent-free materials and vulcanized rubber substitutes contributes to TPU's annual global demand growth of over 5%. As the market expands, product differentiation such as sophistication and high-performance are increasingly required.

Against this backdrop, Kuraray's TPU enjoys good reputation as a high-quality product in its outstanding melt viscosity stability with fewer impurities for applications requiring high molding accuracy.

Furthermore, Kuraray recently developed a unique "TU polymer" which is polyurethane and hydrogenated styrene-diene polymer , cultivating a new market. This polymer is a bound substance, on the molecular level ,of hydrogenated styrenic elastomer (HSBC or SEPTON) and TPU, which have different characteristics. With its compatibility and adhesiveness with a broad range of polymers from olefinic resin to engineering plastic, there is an increasing demand for "TU polymer" as a compatible agent for bicolor molding flexible compounds with hard resin.

Kuraray will attempt to create new TPU markets in areas where the Company is able to make full use of its competitive strengths. In parallel, Kuraray will pursue product synergy with SEPTON and liquid isoprene rubber (LIR) in order to fortify and enhance TPU as one of the Company’s mainstay products in the elastomer business.

Outline of Production Facilities

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