Laiwu Iron & Steel Group and Jinan Iron & Steel Group, two of China’s largest steel companies, have agreed to merge to gain leverage with iron-ore producers and cope with higher raw-material costs, the Wall Street Journal reported. The new company, Shandong Iron & Steel Group, will have a combined crude steel output of 23.8 million metric tons, approaching China’s top steel manufacturer Baosteel, which produced 28.6 million metric tons in 2007. The Chinese government has urged the country’s highly fragmented steel industry to consolidate to boost industry effciency and reduce energy consuption and pollution. Jinan and Laiwu were ranked as the world’s 25th- and 26th-largest steelmakers based on 2007 production. Shandong Iron & Steel will be the world’s seventh-largest steel producer after the merger.