The Chinese government is trying to consolidate the highly fragmented steel industry to put production in the hands of larger, more efficient mills that cause less pollution, while encouraging small, inefficient and highly polluting mills to close.
The recent sharp decline in foreign and domestic demand, especially due to a slowdown in Chinese car sales, could help the government reach this long-term goal more quickly after the consolidation's initial slow start, analysts said.
Rizhao and state-owned Shandong Iron and Steel, located in eastern China's Shandong province, signed a letter of intent on Wednesday, according to the state-controlled China Securities Journal.
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