(Yicai Global) Aug. 20 -- Ansteel Group and Ben Gang Group, two of the biggest state-owned steelmakers in northeast China, have started the process of merging their businesses to create the world's third-largest crude steel producer.

The pair has begun the restructuring process to establish a company with an annual capacity of 63 million tons of the metal, making it China's second-biggest steel producer, the People’s Daily reported today.

The State-owned Assets Supervision and Administration Commission of Liaoning province will transfer its 51 percent stake in Ben Gang to Ansteel for free. Before this, Ansteel's production capacity ranked fourth in China, and Ben Gang was No. 10. By integrating their core businesses, the two should realize economies of scale.

The plans have been brewing for 16 years. The two companies held an opening ceremony of their merger already in 2005 but the process seemed to stall soon after.

After restructuring, Ansteel is expected to have an annual crude steel output of 70 million tons and an annual iron ore output of 50 million tons, according to government plans. The Anshan-based company should make a profit of CNY10 billion (USD1.5 billion) each year and CNY300 billion (USD46.1 billion) in revenue.

The industry has had some big mergers in the past decade to improve efficiency. Baosteel and WISCO joined their forces in 2016 to form China Baowu Steel Group, the world’s largest steel producer. Moreover, Ansteel merged with Pangang Group in 2010.

The industrial concentration of China's top five steel companies should reach 40 percent by 2025, and that of the top 10 should be 60 percent, according to a document the Ministry of Industry and Information Technology issued last December.

Editor: Emmi Laine, Xiao Yi