China's largest steel producer has just made a strategic decision that could see it becoming an even larger entity that can take on other global competitors. China Baowu Steel Group announced that it intends to acquire a controlling stake in Chongqing Iron and Steel Co Ltd, a move that will effectively push the company closer to its goal of an annual output to more than 100 million metric tons per year.

Chongqing Iron and Steel announced that its controlling shareholder, Four Rivers Investment Management Co Ltd, had just signed a letter of intent with China Baowu for the purchase of its controlling stake. The Shanghai-listed steelmaker stated that China Baowu will outright purchase the shares, with the deal expected to be completed by the end of June this year.

The acquisition is the latest in a line of strategic purchases made by China Baowu as part of its strategic plan to reach more than 100 million tons of production capacity by 2021. China Baowu originally revealed its plans in November 2017, as part of its development scheme with the goal of increasing its output from 80 million tons to 100 million tons before 2021.

In June of last year, China Baowu had announced plans to acquire Maanshan Iron and Steel Co. The acquisition effectively expanded the company's crude steel output by around 19.64 million tons.  The additional capacity drove China Baowu closer to its target production capacity. However, it still fell short of its 100 million metric ton-target.

China Baowu is currently the nation's larger steel producer and was formed through the merger of Shanghai-based Baosteel Group and Wuhan Iron and Steel Group in December 2016. The steel giant currethe ntly has a production capacity of over 70 million, making it the world's second-largest steel producer behind Luxembourg's ArcelorMittal.

Chongqing Iron and Steel, which was originally established in 1997, went through a number of owners and stakeholders since it was founded. In 2017, Four Rivers was established as a fund meant to support the development of the company, which entailed massive upgrades and restructuring. China Baowu, through its investment arm Hwabao Investment, had purchased a stake in the Four Rivers fund along with US-China Green Fund.

Apart from helping it reach its goal, the acquisition of Chongqing Steel will allow China Baowu to fully cover the region, cementing its nationwide presence. Baowu already has an established presence in East, South, and Northern China.

China is currently one of the world's largest steel producers. The the combined output of the country's top 10 steelmakers accounts for over 70 percent of China's total capacity.