China's two major steel producers, BaoSteel in Shanghai and the Handan Iron and Steel Group Co Ltd in north China's Hebei Province, have signed a contract to build a joint venture iron and steel plant in Handan.

The plant, with a production capacity of 4.6 million tons, will be completed in 2010 and is one of the few large iron and steel projects to be approved by the state since China began its macro-control policy on the iron and steel industry.

"The cooperation will further streamline the domestic steel industry in order to compete with the international steel giants." said Xu Lejiang, president of BaoSteel, China's largest steel producer.

The plant, with an estimated investment of 19.4 billion yuan (2.5 billion U.S. dollars), is designed to cover an area of 267 hectares.

It will mainly produce high added value products including steel pipes, wire and plates for motor vehicles and household electric appliances.

This is the second trans-regional investment by BaoSteel, after its investment made in northwest China's Xinjiang Uygur Autonomous Region.

The share price of Handan Iron and Steel closed at 8.76 yuan on May 8, rising 6.96 percent; and that of BaoSteel at 12.70 yuan, up6.01 percent.