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NANNING, Sept. 3 (Xinhua) -- China has launched a steel-making project in the southern Guangxi Zhuang Autonomous Region that will have an annual production capacity of 30 million tons, with the formal establishment of the Guangxi Iron and Steel Group here on Wednesday.

The group is a joint venture between Wuhan Iron and Steel Group, China's fourth largest steel maker based in Hubei Province, and the Guangxi regional administration of state-owned assets.

Wuhan Iron and Steel Group is holding a 80 percent stake, in the form of cash input, in the new group.

The Guangxi regional administration of state-owned assets shall hold a 20 percent stake, in the form of all the net assets of its Liuzhou Iron and Steel Group.

The new group expects to begin building its plant in December in Fangchenggang, a major port in Guangxi.

Ma Biao, the Guangxi governor, said he hoped the first production line would be completed in 30 months and fully operational in 50 months.

The coastal plant shall have an initial annual capacity of 10 million tons. Its capacity will be eventually expanded to 30 million tons, at a total cost of about 205 billion yuan (30 billion U.S. dollars).

The two partners will shut 9.1 million tons of obsolete steel-making capacity and 5.41 million tons of obsolete iron-making capacity.

The inauguration of the new group marks another milestone in the reorganizing of China's steel, following similar cases in Guangdong, Shandong and Hebei provinces.

These moves will strengthen the sector's competitiveness, said Xiong Bilin, deputy director of the Industrial Development Department of the State Planning and Development Commission.

The new plant is "the largest iron and steel project in the West China Development Scheme. It reflects the shift of the (steel) industry from the inland to the coastal areas," he said.

China's iron and steel companies are shifting to coastal areas, in part to cut transport costs.