JINAN - Officials in Shandong announced personnel changes at two of

       China`s largest steel makers that will pave the way for a merger,

       part of the larger rationalization of the steel industry. The new

       company will be China`s second-largest iron and steel group.

       The companies -- Jinan Iron and Steel Group (short for Ji`gang) and

       Laiwu Steel Group (Lai`gang) -- which are the sixth- and

       seventh-largest in China, would be combined into the Shandong Iron

       and Steel Group Co., Ltd, sources with the State Assets Supervision

       and Administration in Shandong said on Tuesday.

       The organization department of the Shandong provincial Party

       committee said in an announcement on Sunday that Zou Zhongchen, the

       former general manager of Shandong Metallurgical Industry Company,

       another provincial government-owned company, would be the chairman

       of the conglomerate`s board committee. Ren Hao, the former deputy

       manager and general engineer of Lai`gang, would be the new group`s

       general manager.

       Wang Jun and Song Lanxiang, newly-appointed board chairs for Ji`gang

       and Lai`gang, respectively, would be board members of the new group.

       Chen Bo, head of the supervision department of the administration,

       said that although a formal merger hadn`t yet been publicly

       announced, the new officials would start work on the move after

       their appointments.

       Announcement of the merger, which became known almost two years ago,

       was delayed due to disagreements over personnel arrangements, said

       Chen. The planned merger didn`t progress until the two former board

       chairmen, Li Changshun and Jiang Kaiwen, had retired.

       Under the provincial steel industry plan, the new group would have

       an annual output of 31.6 million tons, second to Shanghai-based

       Baosteel, China`s largest steel producer.

       The current production capacities of Ji`gang and Lai`gang, which

       have hovered at 12 million and 11 million tons, respectively, will

       be halved for energy-saving purposes. The combined entity will build

       a new, modern base in the coastal city of Rizhao, with an annual

       capacity of about 20 million tons.

       Analysts said that the merger would improve the industry`s structure

       and boost its efficiency and global competitiveness.

       Xu Xiangchun, director of the Beijing-based Lange Iron and Steel

       Information Research Center, said that the merger followed a

       national policy of restructuring and strengthening the steel

       industry.

       China is the world`s largest steel producer and consumer. It

       produced about 490 million tons of crude steel in 2007, up 15.66

       percent over 2006. It imported 383 million tons of iron ore last

       year, up 17.4 percent year-on-year, according to the China Iron and

       Steel Association.