Dec. 5 (Bloomberg) -- Baosteel Group Corp., China's biggest steelmaker, bought a 1.44 percent stake in Xinhua Metal Products Co. in the eastern Chinese province of Jiangxi for 200 million yuan ($27 million).

Baosteel bought 20 million shares at 10 yuan each through a private equity offer, Xinhua Metal said in statement today to Shanghai's stock exchange. Xinhua's shares rose as much as 3.1 percent to 15.38 yuan.

``Baosteel has wanted Xinhua Metal for a long time,'' Lin Hai, a Shanghai-based steel analyst at Guotai Asset Management Co., said. ``It's poised to take a bigger stake in the future.'' The money manager has $1.8 billion in assets.

Xinhua Metal produces about 1 million tons of ship plates a year, ranking it as the nation's No. 2 producer, Lin said. China is building more shipyards as it aims to overtake South Korea as the world's biggest producer by 2015. Baosteel said in March that it will buy 35 percent of Changxing shipyard, the country's largest, currently under construction.

Xinhua Metal sold a total of 200 million shares in the private offer to eight companies, including China Shipbuilding Industry Corp., the nation's second largest yard group by capacity, the statement said. Investors can't sell the shares for a year.

Xinhua shares traded at 15.17 yuan at 11:30 a.m. local time break in Shanghai. Baoshan Iron & Steel Co., the publicly traded unit of Baosteel, gained 4.8 percent to 16.28 yuan.

To contact the reporter on this story: Jiang Jianguo in Shanghai at jjiang@bloomberg.netHelen Yuan in Shanghai at hyuan@bloomberg.net

Last Updated: December 4, 2007 23:56 EST