The restructuring plan of the State-owned Anshan Steel Company Ltd. (Ansteel), and Pangang Group Company Ltd. was recently approved by the State-owned Asset Supervision and Administration Commission (SASAC), local media reported.

According to the plan, the two firms will establish a new joint-venture (JV) which will act as the parent company, managing the subsidiaries of both Ansteel and Pangang.

An official from Pangang said that the general plan for the merger had been set two years ago, but it was held off until now due to some details (which he did not mention).

Currently there are four State-owned steel mills in China, with the merger, they will be three, as Ansteel and Pangang constitute two of the four, the other two are Wuhan Iron & Steel Group and Baoshan Iron & Steel Co.

Although Pangang is well-structured with sufficient iron ore resources, it has lacked the capital and technology to perform well in Southwest China. With the support of Ansteel, these long-lasting setbacks will no longer exist, said an analyst.

Ansteel is thinking big on its market expansion with the Southwest (through which the deal is likely to open the gates for expansion), Southeast and Northeast markets in sight.

Pangang has technical advantages in railway steel products while Ansteel mainly produces high value-added products such as flat sheets.

Bai Jing, vice general manager of Ansteel, said previously that after Ansteel, Pangang and Benxi Iron &Steel (Group) Co., Ltd (Bxsteel) merge into one, the new group will become China's largest.