Aug 23 (Reuters) - China's Baosteel Group will take a 51-percent stake in a mid-sized steelmaker Shaoguan Steel in Guangdong province as part of the country's steel restructuring plan, the listed unit of Shaoguan Steel Group said on Tuesday.

The free transfer of the stake is still subject to approval from state assets regulator, SGIS Songshan Co., Ltd , the listed unit of Shaoguan Steel, said in a filing to the Shenzhen Stock Exchange.

Chinese steel mills are encouraged to build greenfield projects on the coast to lower production costs via proximity to imported raw materials, but Beijing has also been reluctant to approve more steel projects in the face of its chronic overcapacity.

Baosteel Group, the country's second-largest mill by output, agreed to set up a joint venture named Guangdong Steel Group in mid-2008, by controlling 80-percent stakes with Guangzhou Steel and Shaoguan Steel , owning the remaining 20 percent, in a move to run the costal Zhanjiang project in the region.

Guangzhou Steel and Shaoguan Steel , both in Guangdong province and owned by the provincial government asset authorities, will withdraw their stakes from Guangdong Steel Group, China Business News reported on Tuesday, without identifying sources.

Baosteel Group set up wholly owned Zhanjiang Steel in April to begin building some facilities in preparation for the integrated Zhanjiang project, with a target annual capacity of 10 million tonnes.

The change in the restructuring move is not expected to affect its plan to operate the project, the newspaper said.

Baosteel Group earlier said it expected to obtain regulatory approval for the project this year.

However, SGIS did not disclose the reason for the change in the restructuring plan by Baosteel.
 

Source:reuters