China plans to cut its ferroalloy production capacity by 25 percent by 2010 to deal with oversupply problem, China Securities Journal reported on Wednesday.

The nation's ferroalloy output capacity will be limited to around 17 million tons a year, a fall of 25 percent from 2005, said the report.

Upon completion of the scheme, the output of large ferroalloy producers with an annual production capacity of above 100,000 tons will account for over 40 percent of the country's total, it said.

The move comes in line with a circular jointly issued by the National Development and Reform Commission and six other departments, which called for stepping up the structure adjustment in the ferroalloy sector, which faces excessive capacity.

The circular said during the 11th Five-Year Plan (2006-2010) period, China will upgrade the access standard in the ferroalloy sector and strictly control investment in the industry.

The circular also encourages Chinese enterprises to explore overseas market and sponsor ferroalloy mines abroad.

The government will also control the excess export of ferroalloy to avoid price fluctuations, it noted.

Data showed that currently there are 1,570 ferroalloy producers in China, with an accumulated capacity of 22.13 million tons.

Additional 161 projects are under construction, with a total designed output capacity of 1.23 million tons.

Last year, China produced 10.67 million tons of ferroalloy, up 16 percent year on year, according to the National Bureau of Statistics.

Source: Xinhua