Jiutian further invests in new methanol plant

Jiutian secures a further 24.5% stake in new methanol plant to enhance integration

• Increased equity stake from 51% to 75.5% in new 250,000 ton methanol plant under construction will provide better cost control and earnings stability from 4Q2008

• Completion of new methanol plant targeted for end 3Q2008 on track

• Ramping up of new DMF plant in 4Q2007, affected by high and volatile methanol price, was slower than expected

• Significantly higher efficiency and better unit cost have since been attained with new DMF plant now operating at 80% capacity

Singapore, 14 January 2008 - Jiutian Chemical Group Limited (“Jiutian Chemical”, “九天化工” or “The Group”), one of the largest dimethylformamide1 (“DMF” or “二甲基甲酰胺”) producers in China, is pleased to announce that it has obtained the approval of the relevant authorities in Anyang, Henan Province, People Republic of China to increase its equity stake in Anyang Jiulong Chemical Co Ltd (“Jiulong”), which has been set up to construct a 250,000 ton methanol plant, from 51% (equivalent to Rmb204 million) to 75.5% (equivalent to Rmb 302 million).

The increase in stake in Jiulong will further underpin the Group’s operation and profitability as the methanol plant will provide a stable and cost effective supply of methanol for the Group’s enlarged DMF production. The scheduled completion of the new methanol plant by the end of 3Q2008 is on track.

Performance of the new DMF plant under Anyang Jiuyang Chemical Co Ltd (“Jiuyang”) which started commercial production from October 2007, encountered high and volatile price movements and unstable supply of methanol, a key feedstock in the production of DMF which the Group had to purchase from third parties prior to the completion of its new methanol plant under construction. Average price of methanol (including VAT) has increased from Rmb2,700 in January 2007 to Rmb3,602 in December 2007, an increase of 33%. As a result, ramping up of production capacity of Jiuyang to efficient levels, and the corresponding financial performance, was below expectations.

With total production of just above 9,000 tonnes in 4Q2007, Jiuyang is expected to generate operating loss of around Rmb 7 million for the Group for FY2007. The marginal loss however is expected to be well absorbed by the profits generated by the other part of the Group.

Jiutian Chemical’s Executive Chairman, Mr. Wang Xianjin (王先进) commented, "Notwithstanding the challenging operating environment faced by the new DMF plant of Jiuyang during its ramping up of capacity in 4Q2007 arising from the high price and unstable supply of methanol, we remain confident of its overall profitability in 2008, barring further unexpected adverse price movements of DMF and methanol, as significantly higher efficiencies and better unit cost have since been attained with the plant operating at around 80% capacity from middle of December 2007.

The performance of the first 30,000 DMF plant under Anyang Jiutian Chemical Co Ltd (“Jiutian”), which has its own methanol production, remained attractively profitable in 2007. The successful acquisition of a further 24.5% stake in Jiulong is therefore strategic as it will provide the Group with a stable and cost effective supply of methanol, a key feedstock for its production of DMF.

When the new methanol plant is operational in 4Q2008, it will not only be able to cushion any volatility in methanol price movements, but also allow the Group to take full advantage of opportunities arising from the excess methanol of around 100,000 tonnes per year over and above the feedstock requirement of its total 150,000 tonne DMF production.

Whilst the marginal loss of Jiuyang for 2007 was inevitable given the unexpected market conditions of methanol, we are pleased to inform that the two tax-free years for Jiuyang will now be for 2008 and 2009, followed by 15% concessionary tax rate for 2010, 2011 and 2012. This will generate significant tax savings for the Group as Jiuyang reaches full capacity operation by end of 1Q2008 and become fully integrated with Jiulong’s methanol plant by 4Q2008.”