Baosteel Group Corp has signed an agreement with the Zhanjiang city government in Guangdong Province to build a huge steel mill project.
The accord, signed on Monday in Beijing, marked a step forward for the long-awaited project - part of the Chinese government's effort to consolidate the fragmented steel industry - to win final approval from the top authority.
Preparations are progressing well for the project, Baosteel said yesterday, without saying when construction will start.
The Shanghai-based mill in 2008 announced plans to take over two small steel firms in Guangdong, forming an 80 percent-owned joint venture called Guangdong Iron and Steel Group.
The Guangdong government agreed to scrap 15 million tons of outdated annual crude steel capacity in conjunction with the launch of the new 5-million-ton-a-year mill in the port city of Zhanjiang.
Baosteel had earlier planned to build a plant capable of producing 10 million tons per year.
The project has been long delayed because of growing concerns of overcapacity in the domestic industry and the global financial crisis which undermined steel demand and mills' balance sheet.
The new plant will produce steel for the auto, home appliance and shipbuilding industries. It will supply the south China and southeast Asian markets.
By Richard Fu
