Weak cement prices no deterrent to southern China capacity expansion

Weak cement prices no deterrent to southern China capacity expansion
Published: 12 December 2006

Chinese cement makers are undeterred by weak prices and are expanding capacity in the south of the country, Citigroup said. "Our latest visit to TCC International Holdings Ltd confirmed that companies’ rapid capacity expansion in southern China is undeterred by the drop in cement prices this year. Greenfield capacity build-up is likely to remain the key growth driver of players in the region," Citigroup said in a research note. Citigroup said TCCI’s 260 yuan per ton costs for its ongoing build-up of its Yingde plant was slightly under its projection of 270 yuan in average cost of new capacity.

The company’s clinker capacity was set to triple. "TCCI expects to complete construction of phase II of its Yingde plant by early 2008, when it will double its clinker capacity with four 6,000 ton per day (tpd) production lines. Parent Taiwan Cement started building another two 6,000 tpd lines in Guangxi, also to be completed 2008. 
 
 The Guangxi project is likely to be injected into TCCI as it targets mainly the same Pearl River Delta market," the note said. Cement prices in Guangzhou fell by nearly 20 pct in the first and have not fully recovered after some increases in the fourth quarter.