Chinese steel mill to merge with state-owned rival

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One of the largest private-sector steel mills in China has agreed to merge with a state-owned rival as the government attempts to push the consolidation through.

Economic pressures have led the Chinese government to make attempts to consolidate Rizhao Iron and Steel and the rest of the fragmented steel industry, the FT.com reports.

The idea is to push production to larger, more efficient mills that are less polluting.

Commenting on the consolidation, steel industry analyst at Umetal, Du Wei, said: "It's quite a representative case of the consolidation trend in the industry at large."

Xu Lejiang, chairman of Baosteel, said: "Mergers and acquisitions are an effective way to tackle overcapacity."

FT.com reports that Baosteel has plans to raise its annual capacity to 80 million tonnes by 2012 from 28 million tonnes in 2007.

Rizhao is one of the steel production bases in China and has the largest ore berth.