This could mean another round of iron ore shipment surge for Australia as China announced on Friday its approval of the $US11- billon steel project proposal submitted by Shanghai-based Baosteel Group.

Once operational, the Baosteel mill, which will be constructed in southeast Guangdong, will produce some 10 million tonne of crude steel each year, adding up to the more than 9 million tonne per annum capacity of the recently approved Wuhan Iron and Steel Group joint project, which will be located in Guangxi.

Reuters said in a report that Beijing has been urging Chinese steel makers to invest on industrial locations near the Asian country's coastal regions, both to spread growth stimulants and to decongest the world's second biggest economy's urban areas.

The reconfigure of China's steel industry, local media reports said, was also aimed to trim the bloated sector and to ease the environmental pressures brought by giant steel mills operating near the nation's key cities.

According to Baoshan Iron & Steel, initial construction activities on the operation site have been commenced three years ago pending the Chinese government's green light for the mammoth undertaking.

Reuters reported that the Baosteel project was given the nod Thursday by the National Development and Reform Commission and will include the building of port facilities that will directly handle the shipment of the finished products and a power plant that will deliver the energy required by the mill's production activities.

The project's approval is in line with Beijing efforts to rationalise its crude steel production while at the same time sustain the expansion of China's economy, which this year was conditioned for a mild slowdown to avert threats of an overheat.

The overall plan, Reuters wrote, includes the setting up of giant mills on coastal locations and the shutting down of relatively smaller facilities to make way for the bigger players.

Over the next three years, China looks forward to move about half of its steel mills to provinces that were deemed more flexible in accommodating their operations.

Also, by limiting the industry to more viable and capable players, Beijing hopes to cut down the excesses on its national crude steel production, which the market has predicted will climb to a high of 900 million tonnes output in the current year.

Baosteel itself has indicated adherence to the general blueprint disclosed by Beijing for its domestic steel industry.

As per the announcement of Baosteel chair Xu Lejiang this month, the company is conducting a review on ways to transfer its operations to places nominated by the Chinese government as more suited to steel mill facilities.

Within the decade, according to Reuters, Mr Xu has indicated his willingness to slash Baosteel's Shanghai production capability by three million tonnes.