Three Chinese steel companies -- Tangshan Iron and Steel Co., Handan Iron and Steel Group and Chengde Xinin Vanadium and Titanium Co. -- agreed on Tuesday to merge, creating the biggest listed steel maker in China.

The three Hebei-based companies were all listed companies under Hebei Iron and Steel Group. The new entity will be the only listed company of the group after the merger.

Annual production of raw steel will be about 32 million tonnes, which will be more than Baosteel's 30 million tonnes.

Tangshan will merge with the two smaller firms through share swaps. One Handan share will be swapped for 0.775 Tangshan share and one Chengdu share for 1.089 Tangshang shares, according to the agreement.

Handan and Chengde would cease to exist as separate legal entities and their assets, debts, businesses and staff would go to Tangshan, analysts said.

Tangshan said the new company would be the only target of any asset injection by the parent company and thus the only beneficiary.

Hu Yanping, steel analyst with Umetal.com, said the merger would not increase the new company's profitability in the short term, although its production capacity would be the largest in China.

"The move will enhance steel industry restructuring, which will cushion the blow (against the industry) as the financial crisis has hurt economic growth."

The plan still needs shareholder and regulatory approval.

Shares of the three companies had been suspended since Aug. 28. Trading resumed on Tuesday.

Tangshan fell by the daily limit of 10 percent to 4.10 yuan (about 58 U.S. cents) from the previous trading day. Handan fell 8.78 percent to 3.43 yuan and Chengde fell by the daily limit to 4.95 yuan.

(Xinhua News Agency December 30, 2008)