Global steel trade leaders Cargill Steel, Duferco, Samsung Corporation and TradeARBED announced plans Wednesday to create an independent global exchange for trading steel on the Internet.
The virtual market will offer online buying and selling of steel, as well as provide financing, risk management and logistics services to the industry. Set for a fourth quarter debut, the exchange will be headquartered in New York.
Andersen Consulting has been hired to define commercial strategy for the venture.
Jim Thompson, president of Cargill Steel, emphasized that the new online exchange — which is being created by fierce rivals — will be independent and open.
“With analysts estimating international steel trading at roughly $100 billion (US$) per year, coupled with an open, competitive and streamlined process, we anticipate value enhancement for buyers and sellers of up to 15 percent,” Thompson said.
As for the viability of the new venture, steel market analyst Peter Marcus, managing partner of World Steel Dynamics, said, “Of all the steel e-commerce companies formed to date, this is the one that has the most global reach.”
The steel industry, like many other industries, is experiencing an online business-to-business (B2B) revolution. Wednesday’s announcement follows the recent move by U.S. Steel to commit to sell its prime and non-prime steel products on the e-Steel Exchange, which already has nearly 1,400 member companies from 65 countries.
FTC Scrutinizes New Marketplaces
The U.S. Federal Trade Commission (FTC) is taking a hard look at the plethora of new marketplaces bringing competitors together in a number of industries. In recent months, nearly 1,000 online marketplaces in 70 industries have been announced by both Internet and offline companies.
The FTC examines agreements among parties in competing relationships for possible antitrust violations, such as rival businesses conspiring to set prices or restrict production. The agency also looks at the possibility of one B2B exchange dominating others, possibly forcing other companies or exchanges out of business.
Obstacles to B2B Success
Despite the obvious benefits of combining supply chain operations online, companies that participate in exchanges face more than a few obstacles.
Firstly, traditional rivalries die hard. Some participants still distrust their competitors and worry about revealing too much information in the exchange. Another issue is that many of the software programs being used by exchange participants are not compatible.
Also, international B2B marketplaces face problems with conflicting currencies and language barriers.