Who will win the steel e-commerce race?

When it comes to e-commerce for steel, China is leading the charge. The country’s 2022 estimated e-commerce for steel tops $50 billion, which is 20% of the entire Chinese market volume and expected to grow further.?Astonishingly, there are some e-commerce sites with daily average transactions of about 300,000 tons a day.?Quite impressive compared to the US, which is still the largest consumer e-commerce market in the world, although not for steel.?American consumers are used to buying everything online; my wife buys even milk online. So why do US-based businesses resist buying commodities like metals online??

Perhaps China’s massive number of steel buyers went through what the American steel market is just now going through.?There are more buyers and more early adapters to test the electronic platforms, word of mouth spreads faster, and the breaking point for new technologies also come a lot faster.?

Moreover, large Chinese mills are strong supporters of new sales technologies and happily direct massive numbers of small steel buyers to online exchanges rather than relying on traditional sales channels.?Those small buyers purchasing a truckload or less could be serviced easily with a platform in between that deals with logistics and collections.?In the meantime, in the US, producers have been historically quite slow adapting new platforms, and many have been reluctant to accept them.?US steel producers, with ever-dwindling numbers through mergers, have been skeptical of steel futures, imports, e-commerce, or anything that threatens their traditional sales models.

Why wouldn’t they??The US steel market is well-insulated with countless antidumping cases and tariffs, and mills have been enjoying the highest steel prices in the world.?Why give up on controlling prices and exposing themselves to more domestic and foreign competition??

Ultimately, this strategy is short sighted and US steel consuming industries are the biggest losers.?While you can protect steelmakers from import competition, many steel producers are struggling to compete with finished steel components made elsewhere.?Domestic steel producers will be harmed in the long run by losing their domestic customers to foreign competition; they are basically cutting the branch they are sitting on.?

Instead of relying on government protection, perhaps US steel producers should focus on their customers’ welfare, as a flourishing customer base will help everyone.?

Take parking in Chicago for example. When I moved to Chicago around 12 years ago, it was incredibly expensive to park your car anywhere downtown, costing no less than $30 or even $40 per day.?Then parking apps changed the equation to consumers’ favor, driving down prices.?Do you think the parking garages were thrilled to accept these parking apps, which reduced prices to $10 to $20 per day? The apps introduced competition among the garage operators—suddenly they had to get on board to install parking access meters that allow online consumers to park their car. ?But the pain was short-lived. As parking became more affordable, more people were able to afford a trip downtown, and as such visitors from the suburbs has increased significantly, and garage operators are enjoying the benefits of more business.?

This analogy can apply to steel industry: make your business more competitive and you will find more customers and increased business without relying on government actions to protect you.?Because one day all those protections will phase out and producers will be left with fewer customers who can afford expensive steel.?

But it’s not only US steelmakers to blame for the slow growth of online steel sales.?The entire supply chain has been quite stubborn to adapt to online transactions, including end-users.?This remains the main challenge for the few second wave e-commerce platforms, no matter how much money they raised and how much they beefed up their staff with technology and steel professionals.?It is going to take some time and persistent effort to build the momentum to tip the industry over.

So, the online companies who want to bring something new to the steel market have to be patient and persistent with our online focus including value proposition, convenience and solutions to the industry.?Short cuts won’t work during this journey.?Companies will be tempted to do offline deals and call them online.?They can hire bunch of guys who can bring their relationships and book of business without ever touching the platform, but they will make no progress in actually changing the buying and selling dynamics.?

In our view steady progress is better than sprinting today and running out of steam tomorrow.?We at StaalX will be in this for the long haul and keep providing value to both buyers and sellers.?We might look like the turtle today but we strive to finish the race ahead of everyone.?

--

This is the fifth posting on the series I am shedding some light on trading, e-commerce for steel and my journey with StaalX. Below are the first four posts on this series.

Post 1:?SteelVillage.com – The beginning of chasing my dreams

Post 2:?Trading Companies are like Crocodiles

Post 3:?Start walking, the path will appear

Post 4: Sailing into the Unknown

?

#rebar?#steeltrading?#ecommerce?#onlinemarketplace #commodities #steel