The Chinese government will carry out policies to encourage mergers and the reorganization of the steel industry by the end of the year, said an official at the Ministry of Industry and Information Technology on Saturday.

The ministry will announce further guidance on mergers and the reorganization of key industries, in which the steel industry will be included, said Zhang Dechen, head of the steel sector of the Raw Material Department of the ministry.

The guidance will support the merger of large-scale steel companies across provinces and regions, and the reorganization of State-owned and private steel companies, which will reduce the number of the steel companies by a large extent, Zhang said.

This will be the first guidance document for mergers and the reorganization of the steel industry after the 12th Five-Year-Plan (2011-15) on the steel industry was published.

"The top 10 steel companies in China generated 49 percent of the country's total steel output in 2011. The figure will grow to more than 60 percent by the end of 2015 according to the 12th Five-Year-Plan," said Wang Guoqing, deputy director of the Lange Steel Information Research Center, an industrial information provider.

Wang said the new guidance will accelerate the steel industry's concentration process.

In the first three quarters, China's steel industry posted total losses of about 5.5 billion yuan ($873 million). During the same period last year, the industry had an overall profit of 38.7 billion yuan.

"This situation brings opportunities to China's steel industry for integration because many medium and small-scale steel companies, which suffer from operational difficulties, will consider merging or being sold," said Li Xinchuang, deputy secretary of the China Iron and Steel Association.