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Thursday, 22 June, 2000, 16:03 GMT 17:03 UK
Steel moves to the internet
Steel factory interior
Steel factories may soon be filled with goods bought online
Europe's four leading steel producers have announced plans to set up two e-commerce market places for their industry.

The virtual steel market would be just the latest in a wave of new business-to-business (b2b) web exchanges that are set to transform entire industries and dramatically cut costs.

Anglo-Dutch Corus, Germany's Thyssen Krupp, France's Usinor and Luxembourg's Arbed hope to launch the two web sites early next year.

Steel will be sold on, while will be designed as e-procurement site to buy raw materials, services, repairs, logistics and other goods.

B2b fashion

The two web sites join a rapidly increasing number of similar ventures for other industries.

Four of the world's leading car makers recently announced the creation of Covisint, designed to bring big buyers and suppliers together.

There are several rival plans to set up web exchanges for the oil industry, while the world of metals already boasts,,, and others.

Steely competition

In the metals industry most b2b sites announced so far are stand-alone sites, or run by just one company.

With demand for steel currently very high, they have found it extremely difficult to get hold of enough material to start trading at all.

The producers, meanwhile, are joining forces as they are worried that they might lose control of the market place, said Philip Tomlinson, director of steel at commodities consultants CRU International.

He believes that it is still far from certain which of the competing web site will ultimate prevail and become the market maker.

Cutting costs

The founding partners of the new online trading platform for the steel market promise that it will offer "permanent liquidity guaranteed by the participation of major players".

Rivals in the steel industry have been invited to join the exchange, and share in its profits.

Finding buyers and sellers on the web should make pricing more transparent and cut costs in the supply chain.

At the same time it will take business away from traditional metal exchanges, cutting out the middlemen.

The steel industry is desperate to cut costs, as it has only just recovered from a collapse of prices one year ago..

Since early 1999, steel prices have slowly crept up again, but analysts at the CRU Steel Price Index warn that they may have peaked already.

As competition increases, the benefit of cost cutting may ultimately be passed on to steel consumers, said CRU's Philip Tomlinson.

The dire market situation has forced steel producers to join forces and merge.

All four involved in the web venture have already been through this process: Krupp joined Thyssen, British Steel and Koninklijke Hoogovens formed Corus, Arbed snapped up Spanish rival Aceralia, while Usinor merged with Sacilor as long ago as 1987, and gobbled up Cockerill Sambre of Belgium.

Despite such mergers, both European and American steelmakers have come under pressure from cheaper steel imports produced in Asia and Latin America.

Price-fixing worries

However, b2b exchanges have come under criticism recently.

In the United States, the Federal Trade Commission is investigating whether such web sites could potentially lead to price fixing, as the bargaining power shifts to industry giants.

The four steel partners promise that will be an "open and neutral internet marketplace".

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