The Hindu Business Line : Tonnes by the wire

EVEN as the wave of revival and consolidation sweeps the global steel industry, and costs and margins continue to remain the focus for the large integrated producers, two important aspects will be watched carefully by these companies: The need to reduce the time taken for reaching their products to the market, and, the related necessity for employing new distribution channels that will reduce the cost of market discovery.

A new, non-traditional distribution channel that has become increasingly popular is trading steel on the Net. The simplicity of operation and the accessibility to potential suppliers and buyers that such trading provides have led to a boom in this medium's usage by the steel industry.

The possibility of matching buyers and sellers in cyberspace while the companies themselves are thousands of miles apart has enabled timely deliveries and a dramatic reduction in marketing overheads for the steel-makers.

One of the earliest and most prominent online trading portals that started in the country was Metaljunction.com Pvt Ltd, a joint venture between Tata Steel and SAIL. This online e-business platform for steel was started in February 2001 and is backed by almost 14 million tonnes of crude steel, the combined annual production of the two founder organisations.

Metaljunction.com has two divisions that work independently — the Web site of this name, and the e-selling business unit, and commercejunction.com, the e-procurement business unit. Besides facilitating online matching of customers and clients, the vertically integrated portal also organises — using technology from global leader Commerce One — competitive bidding events for selling steel.

In the process, the portal company also identifies products and services that are suitable for auctions, undertakes market research and market-making to generate buyer leads; creates suitable market lots to ensure maximum participation from buyers, and conducts the auction event itself.

To complete the transaction, the portal also undertakes collection of payments, such as the earnest money deposit and the principal. MetalJunction has tied up with Citibank for payments. Tata Steel's other online venture is its own business-to-business (B2B) procurement platform. Among the initiatives being under taken by the company to tap the opportunity offered by information technology, eProcurement is one,intended at shortening the gap between the time of ordering and receiving material from its suppliers.

Essar Steel's online forays started with the company connecting its operations to all major customers using its ERP system. These customers can simply go online with Essar to check their order status; despatch details by order, size, grade or date, complete with truck numbers and invoice numbers; the status of accounts and even payment dues. Regular customers can also place orders online.

Essar Steel also actively participates in the Essar Group's Internet venture clickforsteel.com, an online steel portal for the Asian region. Also, Essar is a member of e-steel, a similar US-based exchange.

Online steel exchanges eliminate multiple distribution layers, making transactions speedier, more transparent and cutting down the cost of the commodity produced.

Some of the other Indian online steel trading sites are steelrx.com, steelmart.com, steelexchangeofindia.com and steelnext.com.