ANSHAN Iron and Steel Group has gained approval from China's state asset regulator to acquire Pangang Group Co as part of a restructuring that could create the largest steel maker in the country.

The merger complements China's plan to accelerate the consolidation of the country's fragmented steel sector in a bid to create three to five steel giants to increase competitiveness and phase out outdated production capacity as well as fight for a bigger voice in negotiations with overseas iron ore suppliers.

China's State-owned Assets Supervision and Administration Commission granted the approval last Friday, Angang Steel Co, the listed unit of Anshan group, said yesterday in a statement filed to the Shenzhen Stock Exchange. The Anshan group and Pangang are both 100 percent controlled by SASAC.

Meanwhile, the Anshan group is pressing ahead with its acquisition of Benxi Steel while Benxi is planning to merge with Beitai Iron and Steel Group.

Once the consolidation is completed, Anshan, Pangang, Benxi and Beitai could produce a total of nearly 56 million tons of crude steel annually. The amount is equivalent to about 10 percent of China's annual crude steel output. It makes the new firm China's largest steel producer, surpassing Hebei Iron & Steel Group and Baoshan Iron & Steel Group.

The Anshan group, based in Liaoning Province in northeastern China, will have a strong position in the country's southwestern region through Sichuan Province-based Pangang. The group mainly produces high value added products such as flat sheets while Pangang makes railway steel products.

The statement did not mention whether the new group will keep the two listed units - Angang and PZH Steel, the listed arm of Pangang.

Their shares, suspended on Monday, will resume trading today.