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World Cement,

Kong Zhongxiang, Vice Chairman of China Cement Association, has said that cement demand will continue to pick up during 2010. Last year cement production maintained its double-digit growth, with 176 new production lines coming on stream and with a total investment exceeding 100 billion yuan. Demand for cement is being fuelled by massive investment in infrastructure.

The cement industry will greatly benefit from China’s efforts to expand building materials sales to the countryside through a trade-in subsidy programme. The details of this are still under discussion, but more policies for supporting the cement industry will be introduced this year according to Kong. However due to overcapacity concerns, the government will also step up efforts to eliminate outdated capacity. Kong suggests that large cement producers should take the opportunity for mergers and acquisitions. He estimates that the number of cement producers in the country might be reduced to about 2000 in the next two to three years.

At the same time, Leslie Koo, Chairman of Taiwan Cement Corporation (TCC), has predicted that China’s cement industry will have at least two decades of prosperity as the government has offered incentives to encourage construction of public works. Last month TCC strengthened its position in China’s cement market through the acquisition of Upper Value (annual output 26.85 million t). The acquisition will enable TCC to achieve its goal of producing 50 million tpa output in 2012, one year earlier than expectations. At that time, the group will see its market share in Southern China exceed 20%.

As reported in the Chinese press, BBMG Corp said it had agreed to buy three Beijing-based cement and concrete plants from Lafarge for 507 million yuan (US$ 74.3 million). In a research note, Citi said that the acquisition would give BBMG a 90% share of Beijing’s cement market. BBMG will acquire 65% of Beijing Xingfa Cement Co Ltd, 70% of Beijing Shunfa Lafarge Cement and 76.72% of Beijing Yicheng Lafarge Concrete Co Ltd. Shares in the three are all owned by Lafarge China Overseas Holding, itself a subsidiary of Lafarge Shui On Cement. The three companies operate two new dry process plants and a concrete plant. The move is expected to consolidate BBMG’s market presence in Beijing and the surrounding areas. BBMG said it would increase its cement production capacity of cement and concrete by 1.5 million t and 0.3 million m3 respectively.

A spokesman for  Lafarge Shui On Cement has said that the Group’s strategic focus is in southwest China since the chances  of expanding its business in Beijing appeared to be slim.

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