3b yuan price will give industry leader control of province's biggest smelter Shares in Shanghai-listed Xinjiang Ba Yi Iron & Steel were suspended from trading yesterday on a media report that Baosteel Group would buy a controlling stake in its parent for three billion yuan. Baosteel would take an 85 per cent stake in Bayi Iron & Steel Group while the regional government of Xinjiang would retain a 15 per cent stake, the official Urumqi Evening News said. The deal would make Baosteel the largest shareholder of Xinjiang Ba Yi Iron & Steel, 53.12 per cent owned by Bayi Group. Ba Yi Steel said in a Shanghai stock exchange statement yesterday that it would make an 'an important announcement', without giving further details. Analysts said the potential deal was part of the central government's strategy to consolidate the steel industry to curb overcapacity and improve competitiveness. However, it was unlikely for Baosteel to privatise Ba Yi Steel and fold the assets into the group's Shanghai-listed arm, Baoshan Iron & Steel, in the near term, said Wu Xianfeng, an analyst at Guotai Junan Securities. 'Ba Yi Steel's market is restricted mainly to Xinjiang, which Baosteel's products don't reach because of high transport costs; there's no direct competition between the two listed units,' Mr Wu said. The allure of privatisation was further dampened by the surge of Ba Yi Steel's shares over the past few months, making the stock more expensive than the firm's net asset value, he added. Baosteel also actively bought small stakes in listed steelmakers including Baotou Steel, Guangzhou Iron & Steel, Handan Iron & Steel and Laiwu Steel through the stock market as long-term financial investments that might pave the way for further co-operation, Mr Wu said. A formal agreement would be signed on Tuesday between Baosteel and Bayi Group, the biggest steelmaker in Xinjiang, after they signed a framework agreement in March last year, Urumqi Evening News said. Bayi Group, which has a 75 per cent market share in Xinjiang, was expected to boost production capacity to six million tonnes next year from four million tonnes this year, the report said. Ba Yi Steel reported a 57 per cent slump in net profit for the first nine months last year to 117 million yuan despite a 7.6 per cent change in turnover to 6.2 billion yuan.