Baosteel Group, a leading Chinese steelmaker, announced it would form a new joint venture with two domestic rivals in eastern Zhejiang Province.

Baosteel, together with the Hangzhou Iron and Steel Group Company (HISGC), would restructure the Ningbo Iron and Steel Co. Ltd. as the largest stockholder of the new company, the Shanghai-based steel giant said in a statement.

Under the agreements signed Sunday with HISGC, Baosteel would own 56.15 percent of the new company, with more than 2 billion yuan (US$294 million) investment, while HISGC would have a 43.85 stake, the statement said.

After the restructuring, the Ningbo steel company would further increase capital and expand shares. By then, stockholders would also include the Ningbo municipal government, but Baosteel would still be the largest stockholder.

As one of the most competitive steelmakers in China, Baosteel had been included in the Fortune 500 list for the past five consecutive years.

Baosteel now reports an annual output capacity of 30 million tonnes of steel products, compared to the annual output capacity of 4 million tonnes of the Ningbo steel company.

The restructuring plan is the first of its kind unveiled after the Chinese central government announced a support package for the steel sector on Jan. 14 to boost the "pillar industry" and to cope with the spreading global financial crisis.

The support package requires accelerated upgrading of the steel sector, transforming "big" industry competitors into "strong" international players.

It says the industry needs to eliminate outdated technology, and should not establish new projects that merely add to steel output.

The latest move of Baosteel is in line with the call of the central government, and is aimed at improving the Ningbo company's competitive edge, sources with Baosteel said.

Advanced technologies, equipment and management would be employed at the new company after the restructuring, sources said.

Baosteel has set a target of expanding annual production capacity to 80 million tonnes by 2012. It also eyed annual sales revenue of US$50 billion and profits of US$5 billion.

The steel giant has completed several mergers and acquisitions over the past two years to boost competitive edge for high value-added steel products.

In June 2008, Baosteel opened a 35.86 billion yuan joint venture with smaller rivals in the southern province of Guangdong, merging Guangzhou Iron and Steel Enterprises and Shaoguan Iron and Steel Group.

Baosteel paid 28.69 billion yuan for a 80 percent stake in the newly-formed Guangdong Iron and Steel Group.

In December 2007, it launched a 19.4 billion yuan joint venture with Hansteel Group in Handan, a city in the northern province of Hebei.

In January 2007, Baosteel paid 3 billion yuan for a 69.61 percent stake at Bayi Iron and Steel Group, the largest in northwest China's Xinjiang Uygur Autonomous Region.