Supply Chain Management & Logistics Challenges for the Chemical Industry

1. Supply Chain Management & Logistics Challenges for the Chemical Industry in Central and Eastern Europe April 16, 2009 - HLG Conference, Usti nad Labem, Cz Wolfgang Schnabel Sr Supply Chain Manager Dow Olefinverbund GmbH

2. About Dow ... • Founded in 1897 by Herbert H. Dow in Midland, Michigan • Supplies more than 3,300 products to customers in more than 160 countries • Manufacturing sites in 37 countries • Employs 46,000 people globally • Annual sales of $58 billion (2008) • Europe: • 13,600 People • Annual Sales of $22 billion (2008) • Recent aquisition of Rohm & Haas strongly positions Dow for the future to become: “the world’s leading specialty chemicals and advanced materials company”

3. EEGR: Dow’s Presence, Growth and Opportunities ●Continued business presence since 1960. About 500 Employees ● 30% yearly average growth in 2000 – 2007. +10% in 2008 ● Dow EEGR: 32 states; about 500 million people; 50+ languages ● Russia, Poland and Turkey account for 60% of EEGR sales ● Attracting and developing local talents is a priority ● Investing in local production and JVs Offices Manufacturing Sites ● Bucharest (Romania) ● Budapest (Hungary) ● Kiev (Ukraine) ● Istanbul (Turkey) ● Lavrion (Greece) ● Moscow (Russia) ● Prague (Czech Republic) ● Warsaw (Poland) ● Zagreb (Croatia) ● Almaty (Kazakhstan) next opening ● Vilnius (Lithuania) next opening ● Balatonfüzfö, Hungary (for the production of STYROFOAMTM) ● Kryukhovo, Chekhov Region, Russia (STYROFOAMTM) ● Dilovasi, Turkey (Polyurethane Systems and STYROFOAMTM) ● Lavrion, Greece (Polystyrene, STYROFOAMTM) ● Łazy, Poland (Polyurethane Systems) ● In Vladimir, Russia, the JV company “Dow Izolan” is building its new, large, state-of-the art plant in the PU Systems business.

4. Please kindly note that: • The content of the following presentation is shared and • developed in workshops with a variety of audiences over • The last two years. • The elements are supported by the Chemical Industry • in Central Europe, Logistic Service Providers, Associations, • Chambers of Commerce and other interested Parties.

5. Competitive Situation of the Chemical Industry • The competitiveness of the chemical industry is dependent on its ability to develop competitive clusters based on highly developed logistical infrastructure • The chemical industry in WE is defined by established pipeline networks and the respective logistics • The changing production pattern in the Middle East is impacting the traditional „North-South“ focus to a more „West-East“ focus thruout Europe

6. Current Situation in Central- & East Europe • Chemical Sites in CE & EE • Are inland chemical sites with specific requirements regarding logistics • Do not have a sophisticated network of connections between the chemical sites • Are not equipped with the logistical network to realize the growth regarding the markets in East Europe • A key challenge for the sites in CE & EE will be a stronger interaction between these sites similar to the situation in WE, where this is a reality for many decades

7. Pipeline Infrastructure in CE & EE

8. Further Challenges for the Logistics in CE & EE • Rail Systems in West- and East-Europe not compatible • Inadequate rail- and road infrastructure • Lack of terminal structure for Inter-Modal traffic • Congested ports in the Baltic and the Black Sea • Lack of harmonization of admin and technical standards • Bureaucracy in Customs Clearance – Arbitrary Actions • Lack of harmonization of social standards (driving hours etc) • Lack of a common safety and security standard • Absence of Emergency Response and Crisis Mgmt Systems (i.e. TUIS) • (Non)-Availability of people with excellent logistical background The above varies from Country to Country

9. Proposal to Improve Competitiveness in CE & EE • Coordination of Pan-European infrastructure projects • Demand driven distribution of structural funds • Guarantees for Investments in East Europe • Development of a pan-European Olefins Pipeline network • Investments in Rail- and Road Infrastructure in CE & EE • Investments in Terminals for Inter-Modal Transport • Building of alternative ports for short sea transport • Harmonization of standards • Leveraging of Safety and Security Standards from West Europe • Implementation of Emergency Response and Crisis Mgmt Systems for the Chemical Industry • Transfer of Know How, Experience and Expertize Solutions can only be developed and implemented in close Cooperation between Enterprises, Logistic Providers, Politics and Administration at Regional, National and European Level

10. ChemLog Contribution • The ChemLog Project has been initiated and supported in the framework of the High Level Group discussion • This Interreg Project will initiate exchange of experience and cooperation to improve framework conditions for chemical logistics in Central and Eastern Europe in the next 3 years • ChemLog intends to produce tangible and practical results to support investment preparation and know how transfer • ChemLog intends to involve relevant stakeholders and decision makers from regional, national and European Level to improve policies in favor of chemical logistics in Central and Eastern Europe • ChemLog will contribute to implement HLG recommendations in Chemical Regions and intends to establish structured dialogue with European Institutions.

11. ChemLog Partnership • Ministry for Economy and Labour Saxony-Anhalt • Ministry for Regional Development and Transport Saxony-Anhalt (DE) • isw Institute for Structural Policy and Economic Development (DE), • Polish Chamber of Chemical Industry (PL) • Association of the Chemical Industry Czech Republic, (CZ) • Association of Chemical and Pharmaceutical Industry of Slovak Republic (SK) • Usti Region (CZ), • Province Novara (IT), • Logistikum Competence Centre, Linz (AT), • Regional Development Holding, Budapest (HU) • Associated Partners: European Chemical Regions Network, Chamber Union Elbe / Oder; Voivodship Masovia, PL; Regional Development Agency North Great Plains, HU; Ministry for Environment and Ministry for Transport of Czech Republic, VCI Nordost

12. ChemLog Objectives • Strengthening Railway and Waterway transport for chemical goods in comparison to road to improve safety and environmental protection, reduction of costs and increased speed and flexibility for chemical logistics • Support of development of logistic centres for intermodal transport and their integration in infrastructure planning. • Support of stronger connection of pipelines for the development of an effective central and eastern European Feedstock Network. • Initiate transnational know-how and technology transfer for the development of efficient transport systems with focus on West-East dimension • Support of implementation of trans-European Transport Corridors, Contribution for harmonisation of regulations, coordinated planning of infrastructure and coordinated use of Structural Funds.

13. ChemLog Schedule • November 2008 Start of Project • Tomorrow: Workshop on Chemical Logistics • 2nd/3rd of June: 1st Dissemination Event in Prague • Publication of SWOT Analysis • www.chemlog.info