Four steel companies in the northern Chinese city of Tianjin will merge as part of a central government plan to consolidate the sector.

The China Daily newspaper reports the new Bohai Steel Group, launched on Tuesday, consolidated the assets of Tianjin Steel Pipe Group, Tianjin Iron and Steel Group, Tianjin Tiantie Metallurgy Group and Tianjin Metallurgy Group.

The aggregate crude steel output of the four companies stood at around 20Mt in 2009, which would put it seventh among China's largest steelmakers last year.

On Monday, the Ministry of Industry and Information Technology announced new plans aimed at pushing forward consolidation in the country's huge but fragmented steel industry, where state-owned giants vie with thousands of small private operators.

It said it would encourage state-owned companies to absorb smaller market players by adjusting industry entry standards and product quality regulations, and also threatened to cut off iron ore supplies to companies that failed to comply.

China plans to put 60% of total domestic steel capacity in the hands of its top 10 producers by 2015, up from 44% at the end of last year.