A new steel and iron group was formed on Wednesday in the eastern province of Shandong.

The State-owned Shandong Iron and Steel Group Co Ltd was created out of the restructuring of Jinan Iron and Steel Group and Laiwu Steel Group -- the sixth- and seventh-largest steel makers in the country -- and Shandong Metallurgical Industry Corp. The three belong to the Shandong provincial state assets management commission.

Shandong Iron and Steel Co has a registered capital of 10 billion yuan ($1.4 billion) and is fully government-owned.

Under the provincial steel industry plan, the new group is to have an annual output of 31.6 million tons, second to Shanghai-based Baosteel, the country's largest steel maker. Last year, Jinan produced 12.12 million tons of crude steel and Laiwu turned out 11.7 million tons.

China has been upgrading its steel industry through rationalization in the past few years.

In 2005, Anshan Iron and Steel Group took over the smaller Benxi Iron and Steel Group and formed the Anben Iron and Steel Group. Both companies, which ranked in the top 10 at the time, were based in the northeastern province of Liaoning.

Luo Bingsheng, vice chairman of the China Iron and Steel Association, said that link-ups and restructuring of the steel industry had become a global trend and the new Shandong-based steel group would play an active role in the international competitiveness of the country's steel industry.

China's official industry policy states that by 2010, the crude steel output of the top 10 producers should account for 50 percent of the total, and by 2020, 70 percent.

Last year, the production share of the top 10 steel makers accounted for 36.79 percent of the total, 1.94 percentage points more than in 2006.