"This matter may lead to a change in the company's controlling shareholder and actual controller," it said, adding that uncertainties remained.

Baowu had no immediate comment on the announcement.

The Shandong Provincial State-owned Assets Supervision and Administration Commission said in a statement late Wednesday that the restructuring would promote the development of the local steel sector and enhance the Shandong Steel Group's competitiveness.

"(It would) help our province achieve the goal of peak carbon emissions in advance," the regulator said, adding that the government would "fully support and actively promote" the restructuring.

Chinese media 21st Century Business Herald reported in January that Shandong Iron and Steel Group, China's seventh-biggest steelmaker by production with 31.11 million tonnes in 2020, would be merged into Baowu.

Acquiring the Shandong producer would hoist Baowu's annual steel production from 115 million tonnes last year towards the 150 million tonne mark, more than the 139 million tonnes churned out by the European Union in 2020, according to World Steel Association data.

Baowu's share of China's total steel production would rise to about 14% after the deal.

The top producer's acquisition spree picked up pace in 2020 when it took over Taiyang Iron and Steel (Tisco), China's second-biggest stainless steel maker, as the country strives to meet a target of consolidating 60%-70% of production in the hands of its top 10 steelmakers by 2025.

(Reporting by Min Zhang and Tom Daly, editing by Louise Heavens, Kirsten Donovan and Richard Pullin)