(Yicai Global) Aug. 21 -- China Baowu Steel Group, the world’s largest producer of iron and steel, has taken a controlling stake in stainless steelmaker Taiyuan Iron and Steel Group, the latest chapter in the consolidation of the world’s biggest steel industry.

Under the deal signed today with Shanxi State-Owned Capital Operation, Shanghai-based Baowu Steel took a 51 percent stake in China’s largest stainless steel producer at no cost, listed Taiyuan unit Shanxi Taigang Stainless Steel said in a statement today. The state asset manager retains 49 percent.

The move adds to steps taken in recent years to restructure the country’s iron and steel sector in a bid to reduce excess capacity and emissions.

Founded by the merger of Shanghai Baosteel Group and Wuhan Iron and Steel Group in 2016, Baowu ranked first among global producers last year with 95.5 million tons of steel output. Taiyuan turned out 10.9 million tons. Their combined annual production exceeds 100 million tons.

Baowu also gained a 51 percent interest in state-owned Masteel Group in eastern Anhui province last September. The two accounted for 9.4 percent of the nation’s iron and steel production based on 2018 figures.

Shares of Taigang Stainless [SHE: 000825], which did not trade today, gained 0.8 percent yesterday to CNY3.9 (57 US cents), giving it a market capitalization of CNY22.3 billion (USD3.2 billion).

Through the Baowu-Taiyuan tie-up, the State-owned Assets Supervision and Administration Commission, which is responsible for managing China’s state-owned enterprises, becomes an indirect shareholder in Taiyuan because it owns all of Baowu, the statement added.

Editor: Peter Thomas