Xinyu Iron and Steel Co. Ltd. started construction of a new steel facility upgrade yesterday, after approval from the provincial Development and Reform Commission, a company official said today.

The total investment in the project based in Jiangx Province is RMB 12.6 billion ($1.63 billion) and will allow Xinyu Steel to produce 3 million tons of steel coils per year. Current production is limited to medium steel-plates, wires, strips and silicon sheets, according to a company official who asked to remain anonymous told Interfax.

Construction completion date has been set for the end of 2009 and will be split into two phases. The first-phase will be completed by the end of next year and will increase annual output of hot-rolled steel coils to between 1.5 million and 1.75 million tons, and cold-rolled steel coils to 1.2 million tons.

In addition, Xinyu Steel will abandon high-energy consuming and low-production capacity equipment, and implement energy conservation and environmental protection projects at the steel facility.

Xinyu Steel, a leading steelmaker in China, produced 446,000 tons of steel last month, up 12.3 percent from the same period last year.