Baosteel Group Corp, China's biggest steel producer, will take over two rivals as part of the nation's plan to create bigger steel makers to gain bargaining power for iron ore, according to the China Iron and Steel Association.

Baosteel will take over Ningbo Iron and Steel Group and Baotou Iron and Steel Group, Chi Jingdong, the association's secretary-general, told an industry group in a closed meeting on Thursday. Bloomberg News received a copy of the speech yesterday. China, which produces one-third of the world's steel, is pushing for consolidation in the industry to boost its competitiveness and raw material purchasing power. The government is implementing a 4-trillion-yuan (US$586 billion) stimulus package to boost economic growth.

"The global recession will help speed up industry consolidations," said Luo Wei, a Shanghai-based analyst with China International Capital Corp. "Boosting the concentration will increase steel makers' profit and their pricing power."

Chinese steel makers are seeking the first reduction in seven years for benchmark contract iron ore prices as demand falls.

The government will also push Anben Steel Group, China's fourth-biggest, to merge with Panzhihua Iron and Steel Group, while Taiyuan Iron and Steel Group, the biggest stainless steel maker, will combine with rivals in Shanxi, Chi said.

(Shanghai Daily February 21, 2009)