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SETC tackles market glut
( 2002-02-27 09:20 ) (1 )

Alarmed by an excessive glut in the production capacity of glass and electrolytic aluminium, China decided on Tuesday to strictly scrutinize new projects in the two sectors and eliminate outdated production techniques.

A rush to build new float glass production lines since 1999 has resulted in an upsurge in the country's glass melting capacity, which now stands at 12 million tons, the State Economic and Trade Commission (SETC) said on Tuesday.

But China's need for glass ranges from 9.6 million tons to 11.3 million tons for this and upcoming years, leading to a surplus of at least 1 million tons despite no plans for additional production lines, Ma Liqiang, director of the commission's Economic Operations Bureau, told a press conference in Beijing.

The projection figure for glass demands is based on the development plans of the country's building, transportation and information technology sectors in 2002 and 2003, he said.

The blind expansion in glass production has led to a downturn in profits for the once lucrative industry, he added.

In 2000, the glass industry glittered. It chalked up 1.69 billion yuan (US$203.6 million) in profits. But last year, the sector's profits plunged by 58 per cent even though glass output had increased by 14.5 per cent.

Ironically, even though the country's glass stockpiles hit 750,000 tons last year, it had to import 24.47 million square metres of float glass because China did not produce enough high-quality glass to be used in top-grade buildings and automobiles, according to some industry insiders.

In light of the situation, China will not approve any new regular float glass production lines for the time being, and projects geared to producing high-quality float glass will be subject to strict SETC approval. Local governments will stop any projects planning to expand the production capacity of current sheet glass plants, said Gan Zhihe, another division director of the SETC.

The approach also applies to China's electrolytic aluminium industry, which is capable of producing 4 million tons annually, but will have a capacity of producing 7 million tons by 2005, when the projects now under construction are put into operation, said Gan.

But the SETC's estimation is that by 2005, China needs no more than 5.5 million tons of electrolytic aluminium, he said.

This again means the supply will outstrip market demands, he said.

Already, aluminium prices have spiralled downward in the world market. Domestically, the per-ton price declined by 11.6 per cent in 2001 over the previous year, he said.

To make matters worse, most of the recently added electrolytic aluminium plants used backward production means, which have caused serious environmental pollution, said the official.

"China will suspend new building projects or expansions of the current electrolytic aluminium plants," Gan said. "In addition, factories that use outdated production facilities will be eliminated."