CHINA’S second and sixth-largest steelmakers by output are in restructuring talks, which could presage a merger that would create the nation’s biggest mill and a firm with the scale to rival the likes of ArcelorMittal SA.

    Trading was suspended in the listed units of Shanghai Baosteel Group Corp. and Wuhan Iron & Steel Group Corp. as their parents discuss “strategic restructuring,” according to separate statements Sunday to the Shanghai Stock Exchange, which didn’t elaborate further.

    The two companies had a combined market value of US$16.3 billion as of Friday’s close and capacity of more than 70 million metric tons.

    The talks highlight China’s efforts to overhaul its inefficient State-run sector and bolster an economy headed for its slowest growth in decades.

    A merger of the two would be the biggest in China’s metals sector since December, when China Minmetals Corp., its biggest metals trader, agreed to buy a government-owned engineering and mining group, as the nation seeks to reduce overcapacity while creating globally competitive firms.

    “The merger of Baosteel and Wuhan Iron fits with the government strategy of improving efficiency and reducing competition and overcapacity,” said Xu Xiangchun, chief analyst at consultancy Mysteel Research. “With these two leading the effort there might be more mergers ahead.”

    China’s steel output has peaked while domestic demand is saturated, Chen Derong, general manager at Baosteel, said last month. (SD-Agencies)