Jinan Iron and Steel and Laiwu Steel, two of China's largest steel companies, said Thuesday they planned to join forces to boost their presence in a competitive marketplace.
The link-up — not a merger, according to the two companies' carefully worded statements — will lead to the creation of the Shandong Steel Group, named after the east Chinese province where both are headquartered.
"The organization will bring the respective strengths of the two parties to bear and solidify the market position of both steelmakers," Jinan Iron and Steel said in its statement.
The news is likely to trigger interest abroad since Luxembourg-based steel giant Arcelor said in February it had had won initial approval to buy a 38.41-percent stake in Laiwu Steel for 2.09 billion yuan (260 million dollars).
Arcelor, subsequently acquired by Mittal Steel to form the world's largest steel company, was not immediately available for comment on the reports when approached by AFP Tuesday.
While reports suggested the combination of Jinan and Laiwu will lead to the second-biggest company in China's crowded steel sector after Baosteel, executives emphasized that each would remain a separate entity.
"We and Jinan Iron and Steel will continue our operations as separate legal persons," said Liu Chuanjia, an official at Laiwu Steel.
He said the transaction was similar in nature to a link-up between steel makers Angang and Bengang in 2005.
The deal between Angang and Bengang did not involve stock changing hands but led to the unification of resource use, technology development, marketing, raw material purchases and foreign trade, earlier reports said.
