China Glass in 240m yuan tie-up

China Glass Holdings, which last week forged a manufacturing agreement with British-based Pilkington, will form a 240 million yuan venture with Shaanxi Blue Star to take advantage of lower production costs, the company said yesterday.

China Glass, the nation's largest listed flat-glass producer, said it will use a bank loan to pay up 20 million yuan of Xianyang Blue Star Coated Glass' registered capital for a 25 per cent stake.

Shaanxi Blue Star will pay 60 million yuan from internal resources for its 75 per cent holding, China Glass said in a statement.

The joint venture will set up a second float glass production line at Shaanxi Blue Star's plant in Xian.

An official announcement of the venture is to be released today.

China Glass is seeking to cut costs after making a first-half loss of 27 million yuan from a 22 million yuan profit a year earlier.

Executive director Zhou Cheng said the new venture will benefit from fuel costs that are 33 per cent cheaper using Xianyang Blue Star lines. He did not provide actual figures.

The mainland glass industry will continue to face excess supply and high costs of materials in the short term, China Glass said in its half-year statement.

Profit from the venture, which will add 800 tonnes to the present 110,000 tonnes annual output of China Glass, should start kicking in by 2008, Mr Zhou said.

China Glass last week said it had agreed with Pilkington to set up a low-iron glass manufacturing venture costing 337.3 million yuan.

The two companies will each contribute 67.46 million yuan in cash as registered capital for a 50 per cent stake in the venture in Taicang, Jiangsu province.

China Glass will maintain its focus on exports 'as international glass prices tend to be stable', Mr Zhou said.

'Exports account for 60 per cent of the company's overall business,' he said.