The number of cement makers in China will drop from the current 5,149 to 3,500 by 2010, and those producers will have an average annual capacity of 400,000 tons each, double the level recorded in 2005, the National Development and Reform Commission said yesterday.

The commission also plans to form 10 major companies such as Anhui Conch Cement Co by 2010, each with an annual output of more than 30 million tons. Those companies will account for 30 percent of the market.

Chinese companies have been investing heavily in the cement and steel sectors over the past few years, in response to an investment boom in the real estate market.

Since 2004, the government had imposed macrocontrol measures and asked for restructuring in these sectors, which have been saddled by overcapacity, falling building material prices and rising fuel costs.

Cement production more than doubled in the past five years, reaching 1.06 billion tons last year. China expects its annual cement output to reach 1.25 billion tons by 2010.

Average cement prices halved to 200 yuan a ton last year from 400 yuan(US$50) in early 2004 in some areas in coastal Zhejiang and Jiangsu provinces, the economic planner said.

Thirty-six percent of China's cement companies lost money last year, up from 28 percent in 2004. Most of the unprofitable firms are small companies that cannot keep up with rising costs and increased competition.

Officials say Chinese companies must accept mergers and acquisitions, or they face the risk of losing out to foreign competition.

Overseas giants are increasing their stake in the Chinese market. Lafarge SA of France, Heidelberg Cement AG of Germany and Switzerland's Holcim Ltd have all built up their presence in China. Foreign firms now hold about 5 percent domestic market share.

(Source: Shanghai Daily)