Shougang Group, China's sixth largest steelmaker, is in talks to buy Highsee Iron and Steel Group, the largest private-owned steel mill in Shanxi province, according to reports in the 21st Century Business Herald.

The newspaper cited an unidentified local government official in Yuncheng, Shanxi, as saying Shougang is seeking to become the controlling stakeholder. The official said: " the two sides are now in talks but a detailed plan is yet to be finalized."

It cited another source in Shougang confirming that the company is in touch with Highsee and said it expects Shougang to inject its advantage in manufacturing long steel products.

Shougang Group spokesman in Beijing declined to comment yesterday.

Experts said if the deal is inked, it would intensify Shougang's competition with Taiyuan Iron and Steel headquartered in Shanxi's capital city Taiyuan.

Taiyuan Iron and Steel is now busy with consolidation of some small-sized peers in the province, which is strongly supported by the provincial government.

As a large number of Chinese steel mills have been in the red for the past few months, the government is planning to promote restructuring in the sector to make it more competitive.

A stimulus plan published by the State Council, or the Chinese cabinet, in January encourages several major steel companies to take the lead in forming mega-sized steel groups across the country.

(China Daily April 29, 2009)