Chongqing Steel has received approval from the Chinese and Australian authorities to acquire an Australian mine owned by Hong Kong-registered Asia Steel Holdings.

Chongqing Steel will invest Rmb1.75bn in Asia Steel, in return for 60 per cent of its additional shares.

Chongqing Steel already owns five mines in China and the new acquisition will mean it is self-sufficient in iron ore, according to company management.

China’s largest steel mills are actively looking for overseas mineral resources so that they can break their dependence on foreign suppliers. However, the ability to fund such acquisitions is being affected by the intense domestic competition among steel producers that is dampening profitability in the sector. Maanshan Iron & Steel, the mainland's second-largest steelmaker, posted a net profit of Rmb393m in 2009, 45 per cent less than in 2008. Revenues were down 28 per cent to Rmb50.41bn from Rmb70bn a year earlier.