Wuhan Iron and Steel (Group), the mainland's fifth-largest steelmaker with annual capacity for 20 million tonnes, plans to buy Kunming Iron & Steel Group to secure raw material supplies, expand capacity and increase exports to Southeast Asia. Bloomberg reported that Hubei province-based Wuhan Steel will take over its smaller Yunnan-province-based rival on August 1, citing China Iron and Steel Association's vice-chairman Luo Bingsheng. Wuhan Steel spokesman Bai Fang confirmed the group's intention to buy Kunming Steel, which produces about six million tonnes of steel annually. He said, however, that no formal agreement had been signed. The potential takeover highlights Beijing's effort in consolidating the industry so steelmakers can better compete with overseas rivals and gain more bargaining power when buying raw materials. The government aims to boost output of the top 10 steel mills to half of the country's total by 2010 from 37 per cent in 2005 and further to 70 per cent by 2020, according to a blueprint from the National Development and Reform Commission. 'I think the mainland steel industry consolidation will gather speed over the next few years with a stronger push from the government,' said Andrew Yao Cho-fai, chairman and chief executive officer of Van Shung Chong Holdings, a steel processor and distributor. Earlier this month, Baosteel Group, the mainland's top steelmaker, signed a framework agreement for a strategic alliance with Inner Mongolia-based Baogang Group, paving the way for more consolidation after taking control of Xinjiang Bayi Iron & Steel Group. Wuhan Steel also bought a controlling stake in Guangxi-based Liuzhou Iron & Steel in December 2005 and plans to set up a joint venture in a deal worth 12.7 billion yuan. Mr Bai said he could not reveal details on the Kunming Steel deal, such as the size of the stake and the amount involved. He said the acquisition would be completed this year but the group had no immediate plan to inject the acquired assets into the Shanghai-listed flagship. Given that Kunming Steel sells products to Vietnam, Thailand, Myanmar, Indonesia and Singapore, buying Kunming Steel would let Wuhan Steel tap the Southeast Asian market and more mineral resources as well as expand its production scale, analysts said.