July 13 -- Baotou Iron and Steel Group, the parent of Inner Mongolia Baotou Steel Union (600010), may start building five million tons of sheet steel production facilities in Inner Mongolia in September or October, reports China Securities Journal, citing an informed source.

The company has not received formal approval from the National Development and Reform Commission.

The facilities that Baotou Group is planning to build are high-end 2250 sheet steel production lines.

Baotou Group had specialized in the production of rail steel and had only mastered limited technology on sheet steel production.

Future sales of its high-end sheet steel are a major concern, as there are no downstream customers for such high-end products in Inner Mongolia, said industry insiders.

The Ministry of Industry and Information Technology had said in 2009 that it will not approve applications for steel capacity expansion for a three-year period due to overcapacity.

The State Council published guidelines last June speeding up the restructuring of the steel sector.

Baotou Group had released its 12th Five-Year Plan, and has set a steel production target of 16.5 million tons.

An insider from the steel sector said Baotou Group has total capacity of 13 million tons at present.