Shougang Group, China's eighth-largest steel maker, is seeking a controlling stake in State-owned Tonghua Iron & Steel Co in order to expand capacity.

"Shougang is working on the deal, but we cannot release any details until it's finalized," said Wu Jianxin, director of Shougang's communication's department.

Shougang struck a deal with the owner of Tonghua - Jilin State-owned Assets Supervision and Administration Commission - and agreed to pay 2 billion yuan to take a controlling stake in the company, China Business newspaper reported yesterday, without naming the source.