Oct. 10 (Bloomberg) -- China, the world's biggest producer of metals, will take measures to cap the production capacity of refined lead and zinc by 2010, its latest efforts to curb excessive investment growth.

The government wants to cap annual capacity of refined lead to 4 million metric tons and that of zinc to 5 million tons by closing polluting plants and restricting new projects, the State Administration of Taxation said in a statement today. It wants producers to secure raw materials overseas to meet demand and boost use of recycled metals to about a third of its total demand. China is the world's biggest user of lead and zinc.

The price of lead, used in car batteries, has surged almost 50 percent, and zinc has more than doubled in the past year on the London Metal Exchange as demand from automobile makers rises. Record profits prompted producers such as Huludao Zinc Industry Co. to add capacity, adding to concerns over inflation and declining reserves.

``The decision is aimed at regulating investment and speeding up the restructuring of the industry,'' the statement said. Currently China relies on imports for lead and zinc concentrates, the raw material used to make refined metal. Some of the large lead and zinc smelters don't own mines or can only supply half of their own raw material needs.

China will ban foreign investment in projects that use outdated technology and are polluting. It will restrict lending and use of land for smaller lead and zinc smelters. New plants to be built must have more than 50,000 tons of lead capacity and 100,000 tons of zinc capacity, and those smaller than that will be banned, the statement said.

Other measures include environmental standards and change of taxation of imports and exports, it said. It didn't specify the tax policies, saying they are ``under discussion.''

Investment by lead and zinc smelters rose 70 percent last year from 2004, and 170 new projects are under construction at an estimated cost of 12.5 billion yuan ($1.6 billion), it said. If all plants are built as planned, they will add about 2 million tons of lead capacity and 3 million tons of zinc capacity a year, the statement said.

Most of the mines are small-scale ones and they can't meet the raw material demand for the planned capacity expansion, the statement said. China's annual lead capacity was 2.8 million tons and zinc capacity was 3.4 million tons at the end of 2005.

To contact the reporter on this story: Xiao Yu in Beijing at yxiao@bloomberg.net

Last Updated: October 9, 2006 23:59 EDT