China to eliminate backward production capacity

China is looking to eliminate 600 million tons of production capacity from old, outdated plants by 2012. [$]

production capacity within 2010 to 2012 was approved by both the Chinese National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT). Initially announced in 2007, the move will involve over 3000 local enterprises, China Cement reported.

Strict restrictions on new cement projects and cement production are being enforced by various levels of the Chinese government. Provinces with a per capita cement clinker capacity over 1,000 kg are reportedly unable to build a new production line. Furthermore, provinces with a new dry process cement percentage exceeding 70% are to limit production capacity to 10% of the respective provinces cement output during the previous year.

Chinas cement production overcapacity is approximately 300 million tons; with over 3,000 small vertical kiln factories having a production capacity of 100,000 tons. The price ratio between iron and steel and cement products in China reportedly eclipses to 20:1 ÔÇô a stark contrast to the 3:1 international ratio. According to China Cement, the backward capacity is due mainly to the profit margin achieved from low costs and low-level technology; aggravated by rapid expansion and outdated production capacity. [/PAID]{/reg}