Taiwan’s Asia Cement adds capacity in China

Taiwan’s Asia Cement adds capacity in China
Published: 25 January 2008

Asia Cement Corp , Taiwan’s second largest cement producer, said it is building new plants to meet rising demand in China but has no plans to add to its capacity at home. 
 
"Our plants’ annual capacity on the mainland is estimated to reach about 14Mt by the end of this year and grow to about 16Mt by the end of 2009," vice president WK Chou said in an interview with XFN-Asia.  
 
Its mainland production capacity was 8.5Mt last year, all of which was shipped. 
 
"Given the economic situation in Taiwan, we have no immediate plans to build new sites (at home)," Chou said.  
 
In China, Asia Cement is building new production lines in Jiangxi, Sichuan and Hubei provinces.  
 
Chou said he expects China’s total demand for cement this year to top the 1.2-1.3bn tons consumed in 2007.  
 
"China’s economic growth should support the cement market this year. There are no signs indicating any cooling for the industry," he said.  
 
China’s National Bureau of Statistics yesterday said the economy grew 11.4 per cent in 2007, its fifth double-digit increase in a row.  
 
The National Development and Reform Commission, China’s principal economic planning agency, has projected 11 per cent growth this year.  
 
Asia Cement is expanding on the mainland regardless of the higher costs occasioned by a new labour law and changes to the corporate tax code.  
 
"It is unavoidable for labor costs to rise along with economic development," Chou said. "The new labor law will not affect our willingness to invest on the mainland."  
 
The new law mandates better protection of workers’ interests and benefits. For example, it curtails the practice of repeatedly signing employees to short-term contracts to prevent them becoming eligible for benefits.  
 
This year also sees the unification of corporate income tax rates for foreign and domestic firms. Some foreign companies in China, which now pay as little 15 per cent, will begin to feel a tax bite of 25 per cent.  
 
In spite of these developments, the forced decommissioning by the government of outmoded and dirty cement plants is seen as a catalyst for top-tier producers that supply a better quality of cement and generate less environmental pollution.  
 
"Our plants produce high-quality cement and we will benefit from such regulations," Chou said.  
 
Asia Cement now charges anywhere from CNY350- 450/t in the mainland, where cement prices vary from province to province.  
 
Unlike some mainland strategic industries, which are not allowed to pass on all their cost increases to the customer, Chou said cement prices may adequately reflect cost increases, such as higher transport costs for coal.  
 
The company’s China operations come under subsidiary Asia Cement (China) Holdings Corp, which is planning to list in an equity market.  
 
Chou declined to disclose details.  
 
"We are planning a listing for the subsidiary but we are in the ’quiet period’ now," when promotional publicity is banned, Chou said.