SHANGHAI, China (AP) -- Major Chinese steel maker Wuhan Iron & Steel Group has joined with smaller partner Liuzhou Iron & Steel Group to set up a venture with an eventual annual capacity of 30 million tons, the companies and reports said Thursday.

The project gives Wuhan Iron & Steel, also known as Wisco, an 80 percent stake in the joint venture through a cash investment, while Liuzhou Iron & Steel, or Liugang, will contribute all its net assets, Liugang said in a statement to the Shanghai Stock Exchange.

The owner of Liugang, the regional state assets administration in Guangxi, in southwestern China, will hold a 20 percent stake in the venture, to be called the Guangxi Iron & Steel Group, it said.

The project is part of a gradual process of consolidation in China's steelmaking industry. Wisco, now the country's fourth-biggest steel producer by output, will rival the country's biggest three makers.

The 205 billion yuan ($30 billion) project, to be located in the Guangxi port of Fangchengang, is due to begin operations in just under four years, with an initial annual capacity of 10 million tons, the official Xinhua News Agency and other reports said.

The two companies will shut 9.1 million tons of obsolete steelmaking capacity and 5.41 million tons of ironmaking capacity, the reports said.

Shanghai-traded Liugang gained 5.2 percent to 4.23 yuan Thursday, while Wuhan Steel Co. edged 0.3 percent higher to 7.11 yuan.

China is the world's biggest maker and consumer of steel.

In June, two other major Chinese steel companies, Tangshan Iron & Steel Group and Handan Iron & Steel Group, merged to form a new state-owned company called Hebei Iron & Steel, with an expected annual production capacity of nearly 32 million tons.

That venture displaced Shanghai-based Baosteel Group Co., whose annual output in 2007 was 28.6 million tons, as China's biggest steelmaker, and the world's fifth-largest.

But Chinese steelmakers have been cutting back some production as demand slows due to a deceleration in global demand.