CHINA'S Anshan Steel Group plans to take over a smaller mill in southeast China as it seeks to forge a steel major in the country.

Anshan Steel has applied to the Ministry of Industry and Information Technology for permission to acquire Sansteel Minguang from Fujian Sangang Group, Sansteel Minguang said in a statement filed to the Shenzhen Stock Exchange yesterday.

The acquisition will boost Anshan Steel's annual production capacity by 5 million tons.

The move also follows the government's call to consolidate the fragmented steel sector to create three to five steel giants to raise competitiveness and eliminate outdated production capacity.

Industry observers said the takeover may signal Anshan Steel is starting to consolidate the steel sector in Fujian Province and will increase production capacity in the region.

Anshan Steel, based in Liaoning Province, has already extended to the country's southwestern region by merging with Sichuan Province-based Pangang Group in late May.

The news of the planned takeover came a day after Panzhihua New Steel and Vanadium Co said it would swap its 10 billion yuan (US$1.5 billion) of steel assets for parent Anshan Steel's iron ore and other mining assets, Panzhihua said in a statement late Thursday.