Anhui Conch Cement (600585, 0914.HK) plans to invest 800 million yuan to build a cement grinding plant with capacity of 6.6 million tons in Zhejiang, reports yicai.com.

The first phase of the project is projected to produce four million tons, with expected annual output value of 1.5 billion yuan.

The cement maker recently spent 98.01 million yuan to acquire a plot of land with an area of 200 mu (one mu = 666.67 square meters).

Separately, China National Building Material (CNBM) (3323.HK), the largest competitor of Conch Cement in China, started to sell equity in four cement makers in Zhejiang. The stakes were purchased five years ago.

CNBM had acquired a number of cement makers in Zhejiang during past the past few years, improving it ability to control the market.

Cement makers in Zhejiang had generated huge profits following China's four trillion yuan stimulus package launched after the financial crisis a few years ago.

According to Cui Xiaoming, secretary-general of the Zhejiang Cement Association, any addition to the cement production capacity in the province will result in overcapacity. Cui said the government should control total output levels.

Zhang Mingjing, vice president of Conch Cement, said the coasting region around Wenzhou is a relatively independent market. Some of the areas in this region do not have excess capacity and needed to pay high transportation costs to import cement.

Zhang said the cement grinding plant will use waste generated by large power plants near Leqing Bay to produce cement, thus  maximizing resource usage.

Conch Cement has basically completed its distribution network in the Zhejiang market, with a focus on the coastal regions,  added Zhang.

Though the company has capacity of 60 million tons in Zhejiang, it only produced 42 million tons in 2011 due to production restrictions imposed by the government.

According to Yang Zhi, vice chairman of the Leqing Bay port Development and Construction Management Commission, Wenzhou has annual cement demand of 10 million tons, and low production levels in the city has resulted in cement prices that are 30-50 yuan higher than those in Ningbo and Taizhou.