China is considering a sweeping overhaul of its steel industry that would consolidate major steel producers into two giants, with one located in the north and the other in the south, according to people familiar with the plan.

Shanghai Baosteel Group Corp and Wuhan Iron & Steel Group Corp will be merged into Southern China Steel Group, while Shougang Group and Hebei Iron & Steel Group will combine into Northern China Steel Group, said the people, who declined to be identified because the information is confidential. The combinations will give Chinese steel mills the scale to rival global giants such as ArcelorMittal SA.

The State-owned Assets Supervision and Administration didn't respond to a request for comment, while a Baosteel Group spokesman declined to comment when reached by Bloomberg.