China is expected to announce plans to merge the country's top steelmakers this week, according to media reports, creating the world's second-largest manufacturer of the commodity, as markets struggle with a glut caused by Chinese overcapacity.

State-owned Baosteel Group, China's second-largest steelmaker, will absorb Wuhan Iron and Steel Group to create the new entity, the China Business News reported late Monday.

The two firms rank fifth and 11th respectively by production capacity in the world.

The new firm will be called China Baowu Iron and Steel Group, the report said, adding the state asset watchdog has already approved the plan and submitted it to the State Council -- China's cabinet -- for final approval.

China Securities Journal, which is managed by the official news agency Xinhua, said the plans could be announced this week.

The combined production capacity of the two firms reached 60.7 million tonnes last year, data from the World Steel Association showed, which would make the new entity the world's second biggest producer by capacity, behind ArcelorMittal.

The two first announced they would conduct a "strategic restructuring plan" in June.

Chinese steel demand has slumped as economic growth slows and the global steel industry is assailed by overcapacity. The crisis has seen manufacturers in Asia, Europe and the US suffer huge losses and led to political rows and accusations of dumping.

Shanghai-based Baosteel's net profit plummeted 83 percent to 1.0 billion yuan ($150 million) last year, while Wuhan Steel lost 7.5 billion yuan, compared with a 1.3 billion yuan net profit in 2014.

Beijing has vowed to eliminate 100-150 million tonnes of capacity -- out of a total of 1.2 billion tonnes -- by 2020.