Chihiro Kanagawa, President and CEO of Shin-Etsu Chemical Company, Ltd., announced today from the corporate headquarters in Tokyo plans for major expansions of the company's production capacity for methylcellulose in Japan and Germany.

In Japan, the production capacity at Shin-Etsu's Naoetsu Plant (Joetsu-shi, Niigata-ken) will be increased from 20,000 tons per year to 23,000 tons per year. In Europe, the production capacity of SE Tylose, a 100% subsidiary of Shin-Etsu Chemical, will be increased from 27,000 tons per year to 40,000 tons per year.

The expanded operations are scheduled to start in Japan at the end of this year and in Germany during the third quarter of 2006. The combined investment for the two projects is projected to be about yen20 billion (U.S. $ 190 million).

The decision to expand production capacity at this time was made because sales in major uses such as construction materials and pharmaceuticals are projected to have steady growth. In addition, new applications are expected to accelerate the overall demand for methylcellulose.

Shin-Etsu Chemical became the world's largest producer of methylcellulose at the end of 2003 when it acquired the cellulose business unit of the Swiss company Clariant. This unit is now known as SE Tylose GmbH & Co. KG.

With the expansions being announced today, Shin-Etsu Chemical's total methylcellulose production capacity will be increased from 47,000 tons per year to 63,000 tons per year. This capacity strengthens Shin-Etsu's position as the world's number one producer of methylcellulose and places it well ahead of others in the field.

With the establishment of SE Tylose in Germany, the Naoetsu plant shifted its focus to growth in value-added applications for industries such as pharmaceuticals in both the Japan and global markets. The latest expansion in Naoetsu will establish a system of production for a variety of small volume products while also strengthening its Good Manufacturing Practices (GMP). Simultaneously, the plant will be able to meet customer's growing meets in pharmaceutical and other applications.

SE Tylose in Germany produces hydroxyethylcellulose (HEC) in addition to methylcellulose. HEC products are supplied to global customers primarily for applications in building construction and coating materials. Since the beginning, the company has accurately foreseen customer needs and with diligent sales efforts, it has maintained full production and contributed to the profits of the parent company. In the future, along with the steady growth in global building construction applications, Shin-Etsu plans to expand in Europe through applications outside of building construction.

Cellulose derivatives are water-soluble polymers whose principle raw material is pulp. Applications of methylcellulose are found in building construction materials and pharmaceuticals as well as in toiletries and civil engineering. Shin-Etsu Chemical holds the world's top position in pharmaceutical applications and also in building construction material applications. As a result of the planned expansions, Shin-Etsu will strengthen its market position in all of these fields of application. At the same time, Shin-Etsu will pursue applications that will make good use of the advantages of its bipolar production technology. Through these advantages, Shin-Etsu will be better positioned to expand its global share of the cellulose derivatives markets.

* SE Tylose GmbH & Co. KG Location: Wiesbaden (near
Frankfurt, Germany).

* GMP: Acronym for Good Manufacturing Practice. A standard
established by Japan's Ministry of Health, Labor, Welfare
concerning manufacturing control and quality control of
pharmaceuticals and medical devices.

Tokyo March 1, 2005