(Yicai) Jan. 11 -- Shares in Xinfengming Group plunged by the exchange-imposed limit today after the leading Chinese polyester fiber supplier announced a production expansion scheme worth CNY20 billion (USD2.8 billion), triggering market concerns of surplus supply.

Xinfengming’s share price [SHA:603225] slumped 10 percent to trade at CNY12.60 (USD1.80) as of 2.30 p.m.

The new facility, which will be located near the company’s headquarters in Jiaxing, southeastern Zhejiang province, will produce 2.5 million tons of polyester fibers a year, the firm said yesterday. There will also be a factory for polyester film, with an annual output of 100,000 tons.

The project will be built in two phases. The first phase, which will cost around CNY3.5 billion (USD490.3 million), will take around three years to complete and will produce 650,000 tons of various kinds of polyester fibers a year, it said. During construction, the company will keep its debt-to-asset ratio under 68 percent.

The specifications and uses of the polyester fibers to be produced by the new plant are different from Xinfengming’s existing products. The project will help the company adjust its product portfolio and enhance its competitiveness.

Xinfengming already holds 12 percent of China’s polyester filament market. As of August last year, it had a yearly output of 7.4 million tons of polyester filaments and 1.2 million tons of polyester staple fibers.

Editor: Kim Taylor