Ningbo Iron & Steel, a flat steel producer with a crude steel capacity of 4 million ton/year, is currently owned by Beijing Jianlong Heavy Industrial (30.5%), Fosun Group (20%), and Hangzhou Iron & Steel Group (43.8%).

According to local media, both Fosun Group and Jianlong Heavy Industrial have acknowledged that talks with Baosteel are close to concluding once a final takeover price has been agreed. Hangzhou Iron & Steel, located south of Shanghai, does not appear to be in similar talks with Baosteel.

The Chinese government recently unveiled its new steel policy package, part of which was the encouragement of consolidation. However, the officials at Ningbo Iron & Steel and Fosun Group did not indicate that the new policy had sped up the process.

Industry sources say Ningbo Iron & Steel is a good target for Baosteel to expand its capacity because Ningbo has the second biggest port in China and is one of the main steel markets in eastern China.

Baosteel plans to increase capacity to 80 million ton/year by 2012. After taking over south-west China’s Bayi Iron & Steel in 2007 and forming southern China’s Guangzhou Iron & Steel in 2008, Baosteel Group owns a crude steel capacity of around 40 million ton/year.