1. Western Coatings Show – October 2015 New Reds – Pigment Innovation

2. 2 Topics Production processes for iron oxide red pigments 1 4 Sustainable New Red pigments for the coatings market 2 Today´s Penniman Red Process 3 Tomorrow´s Penniman New Red Process

3. 3 Synthetic Iron Oxides – a global market by color, region & application By color [kt in %, 2013] By application [kt in %, 2013] Global market for synthetic iron oxide pigments [~887kt in 2013] Red 43% Blends 5% Black 23% Yellow 29% By region [kt in %, 2013] Americas 24% EMEA 33% APAC 43% Coatings 26% Plastics 5% Construction 48% Paper 3% Other 18% Source: IPG GPM market analysis

4. 4 What is sustainability? According to the EPA* What is sustainability? Sustainability is based on a simple principle: Everything that we need for our survival and well-being depends, either directly or indirectly, on our natural environment. Sustainability creates and maintains the conditions under which humans and nature can exist in productive harmony, that permit fulfilling the social, economic and other requirements of present and future generations. Sustainability is important to making sure that we have and will continue to have, the water, materials, and resources to protect human health and our environment. * Obtained from the EPA United States Environmental Protection Agency website.

5. 5 Sustainability: Setting up new sustainability standards in iron oxide and chromium oxide business Sustainability  LANXESS is driver for continuous HSEQ improvements within the iron oxide industry globally  Global sustainability approach leads to more environmentally friendly processes and products  LANXESS’ products are highly efficient, sustainable and without any harm to our health or to nature (SCS certificate for recycled content)  Focus on sustainability in all production steps brings a competitive advantage  CO 2 neutral production of energy by using biomass (Co-Generation plant – Steam & Electricity)  Reduction of CO 2 emissions by 44kt annually Porto Feliz, Brazil  State-of-the-art waste water treatment plant  Reduced emissions by improved energy utilization and water management  Black plant recycling by-product of yellow production Jinshan, China  Innovative waste water recycling  Processed water on the recovery unit does not require further cleaning Krefeld- Uerdingen, Germany  Penniman process was optimized using waste water treatment and off-gas scrubbing  The plant will have high energy efficiency, that meets and exceeds the latest environmental standards Future plant Ningbo, China

6. 6 “Laux Red” Process Laux- Reaction Milling Classification Filtration Washing steam Fe waste water Nitrobenzene Additives Calcination Raw Aniline Aniline DampingDestillation H 2 to power plant exhaust gases sulfacite plant “Copperas Red” Process FeSO 4 x 7H 2 O Purification Crystallization Dehydration FeSO 4 x H 2 O Calcination Washing Filtration SO 2 SO 3 Metal sulfates Contact sulfuric acid plant Red FEO Drying Milling 3. Penniman- Reaction Red FEO Filtration, Washing 1. Iron nitrate Air Steam HNO 3 NO x 2. Seed Waste- water HNO 3 Fe Drying (and Milling) “Penniman Red” Process All industrial Red FEO production processes require special treatment for sustainable operation

7. 7 Topics Production processes for iron oxide red pigments 1 4 Sustainable New Red pigments for the coatings market 2 Today´s Penniman Red Process 3 Tomorrow´s Penniman New Red Process

8. 8 1.Iron nitrate preparation 2.Iron oxide seed preparation (pressure reactor) 3.Penniman reaction (pigment growth) Penniman Red Process – Basic Steps Iron + Nitric acid Iron oxide seed + Nitric oxides (NOx) Iron + Nitric acid Iron nitrate + Ammonium nitrate Iron + Iron nitrate + Seed + Air Pigment + Nitric oxides (NOx) 3. Penniman- Reaction Drying (and Milling) RED PIGMENT Filtration, Washing 1. Iron nitrate Air Steam HNO 3 2. Seed Waste- water HNO 3 Fe NOx Chinese producers use the Penniman Red Process for the production of Red FEO pigments

9. 9 Iron 3. Penniman- Reaction Drying (and Milling) RED PIGMENT Filtration, Washing 1. Iron nitrate Air Steam HNO 3 NOx 2. Seed Waste- water HNO 3 Fe Penniman Red Process – reaction principles Fe O O O2O2 O O Seed Fe 2+ O -- NO 3 - O2O2 H+H+ Air O -- H+H+ Fe 2+ O2O2 NH 4 + Step 1: Adsorption of Fe 2+ Step 2: Oxidation Step 3: Dissolving of iron Step 1: Adsorption of Fe 2+ Step 2: Oxidation Step 3: Dissolving of iron NO Penniman Red – Growing of the pigment particle seed

10. 10 Major finding: In today´s standard Penniman Red process technology significant amounts of laughing gas are formed Known to the industry:  Formation of toxic nitric oxides (NO, NO 2 ) in the Penniman Red process NEW finding and not described yet:  Formation of laughing gas (N 2 O)  Significant amounts of laughing gas are formed in the Penniman Red process which could not be avoided by process optimizations A small molecule, but a large impact on process O N O N O N N O Fe Step 1: Adsorption of nitrogen oxide Step 2: Formation of laughing gas (N 2 O) Step 1: Adsorption of nitrogen monoxide (NO) Step 2: Formation of laughing gas (N 2 O) Step 1: Adsorption of nitrogen oxideStep 1: Adsorption of nitrogen monoxide (NO)

11. 11  The waste gases from the process consist of toxic nitric oxides (NO, NO 2 ) and laughing gas (N 2 O) Laughing gas…  is a strong green house gas with a ~300 times higher impact than carbon dioxide  is also a very potent ozone-depleting chemical compound causing holes in the stratospheric ozone layer, which protects the earth from UVB radiation Waste gas emission Today´s Penniman Red process offers a range of very attractive bright red pigments, but it is challenging due to environmental issues

12. 12  The waste water of the Penniman Red process contains ammonium nitrate, which is a very strong fertilizer  Discharging of ammonium nitrate into rivers and lakes leads to eutrophication – kills fish and causes shortages of drinking water 3. Penniman- Reaction Drying (and Milling) RED PIGMENT Filtration, Washing 1. Iron nitrate Air Steam HNO 3 2. Seed Waste- water HNO 3 Fe NOx N 2 O Untreated waste water can cause eutrophication Ammonium nitrate (NH 4 NO 3 ) is an effective fertilizer and can cause algae blooms Source: Sueddeutsche dpa

13. 13 Source: China environmental Report 2014, HCA Consulting China China‘s environmental crisis

14. 14 China‘s focus on the reduction of NOx and ammonium nitrate Source: China environmental Report 2014, HCA Consulting China 2222

15. 15 Topics Production processes for iron oxide red pigments 1 4 Sustainable New Red pigments for the coatings market 2 Today´s Penniman Red Process 3 Tomorrow´s Penniman New Red Process

16. 16  The Penniman red growth reaction requires large amounts of energy particularly in regard to steam stripping during the Penniman growth reaction  Due to process optimizations and special aeration techniques we were able to reduce the required amount of energy for the Penniman growth reaction by 80% Energy savings Energy demand [%] Significant energy savings by efficient aeration technique in combination with process optimizations Literature known NEW RED Penniman reaction 80 % less energy

17. 17  1) Due to a higher solid content in our process steps, we reduced the required water amount considerably  2) The used water is subsequent purified in our state of the art water treatment plant by three methods: o Sedimentation tanks o Biological denitrification process o Ultrafiltration and reverse osmosis (RO)  3) By reverse osmosis the sulfate-enriched water which is a valuable raw material, can be reused back in our process as a steering chemical Recycling of process water Na SO 4 Na SO 4 Na SO 4 Na pressure membrane Purified water Principles of reverse osmosis Up to 80% of the process water will be recycled and can be reused in our process

18. 18  Nitric oxides and laughing gas are formed in all three steps of the Penniman red process but especially in the seed formation and the Penniman reaction  Due to an efficient process control, we are able to reduce NOx and N 2 O emission significantly  Furthermore, our optimized process shows a steady stream of NOx emission which make the recycling scrubber system more efficient Reduction of emissions Before optimization Optimized process Step one: Controlling and reduction of waste gas emission including laughing gas successfully

19. 19 Inorganic Pigments Group (IPG) will treat laughing gas, as well as toxic nitric oxides to naturally occurring air components  Despite having an efficient recycling scrubber system to recycle the nitric acid, the waste gas still contains laughing gas (N 2 O) and very small amounts of nitric oxides (NO/NO 2 )  A multi state catalytic converter will convert the gases into naturally occurring nitrogen gas (N 2 ), oxygen (O 2 ) and water (H 2 O) Catalyst Nitrogen (N 2 ) Oxygen (O 2 ) Water (H 2 O) Nitric oxides (NO/NO 2 ) and laughing gas (N 2 O) Catalytic decomposition of NOx and laughing gas

20. 20 IPG´s New Penniman Red process will be the first, with exhaustive waste gas treatment, including laughing gas decomposition CO 2 impact of average Chinese Penniman Red technology Reduction by laughing gas treatment Process energy savings -71% of CO 2 equiv IPG´s process Savings of 88% of CO 2 equivalents per ton pigment For the average Chinese production of 1 ton Penniman Red pigment, climate altering gases with an impact of 25 tons of carbon dioxide equivalents are formed. Our New Penniman Red Process will reduce the formation of carbon dioxide equivalents by 88% or 3 tons of carbon dioxide equivalents per 1 ton of Penniman Red pigment. -17% of CO 2 equiv

21. 21 Topics Production processes for iron oxide red pigments 1 4 Sustainable New Red pigments for the coatings market 2 Today´s Penniman Red Process 3 Tomorrow´s Penniman New Red Process

22. 22 LANXESS’ existing Laux Reds cover a very wide spectrum of red color shades with high milling stability and also are strong with bluish red pigment shades  Wide color spectrum for iron oxide reds  High milling and heat stability reds due to calcination  Strength in medium and bluish red color shades  But, limitations of the light yellowish color shades Laux Reds LANXESS Laux Reds

23. 23 Copperas Red shades cover a missing color space – however this production process is not used by LANXESS because of environmental issues  Color shade of Copperas Reds (e.g. 1599D, 3098D) with strengths on clean yellowish red  These red types cover the missing color space to our Bayferrox Red product range  However, Copperas production process is seen by LANXESS as environmentally unfriendly and is therefore not used by LANXESS Laux Reds Copperas Reds Laux vs. Copperas Reds

24. 24 Laux vs. Copperas vs. existing Penniman LANXESS has chosen the Penniman Red process to bring bright New Reds similar to Copperas Reds to the market – our latest investment in Ningbo  Pigments produced by the Penniman process have a very clean color shade red with the advantage of a light yellowish color shade  The New Reds produced in Ningbo will cover a part of the Copperas as well as a part of existing Penniman Red range and are an extension of the Laux color range Laux Reds Copperas Reds Existing Penniman Reds

25. 25 LANXESS Inorganic Pigments – New Red New Red color shades – a major finding in our trial production for the Penniman Reds showed that we will be able to produce even brighter red shades  New Red color shades - unknown to today color space for iron oxide Red pigments, opens the door for new opportunities  All the pigments produced in the new Ningbo plant will comply with the Bayferrox quality standards  The high product requirements for the Coatings industry will be fulfilled  The products will be produced in the most sustainable way  New products and applications may be possible for our customers Laux Reds Copperas Reds New Red Shades ! New Red from Ningbo Existing Penniman Reds

26. 26 Summary  Nearly 50% of the todays global iron oxide red is produced in China and heavily pollutes the environment.  LANXESS – Having 88 years in iron oxide production, IPG has the experience to optimize the Penniman Red production to a real sustainable process.  New color shades of iron oxide reds could be achieved  The New Penniman Reds are an optimal extension for the well known Laux Red pigment LANXESS - As a responsible partner for the paint industry, it is our duty to solve existing environmental problems and also develop the best products for the industry

27. 27 Dr. Volker Schneider Head of Global Competence Center Paint And Dr. Waldemar Czaplik Inorganic Pigments R & D Many Thanks to the following Acknowledgements

28. 28 Thank you for your attention!