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.