China's largest private steelmaker Shagang Group has recently started a project to build the Jiulong Online Steel Trading Platform designed to incorporate services providing information, trading, processing and dispatching.

Online steel trading platforms are being launched in China, as the industry is suffering from record-low profitability and some steelmakers are losing money.

Baosteel set up the Shanghai Iron and Steel Trading Centre, an online spot-steel trading platform, on May 31. China has 700Mt/y of steel products, some of which are traded two or three times, so the whole trading volume is massive, according to Chairman of Baosteel, said Xu Lejiang.

Baosteel’s trading centre involves a planned investment of RMB 100M to 200M ($16-32bn) and aims to trade 50Mt of steel products and incorporate over 70000 members by 2017, giving an annual financial turnover of RMB 20bn ($3.2bn). Online trading is expected to account for 20% of Baosteel's entire sales revenue by 2018.

Baosteel is the only industrial company to date to have been granted a third-party payment license.
Last year, China Minmetals and 11 steel traders co-founded a network for steel logistics and information, the China Steel Logistics E-Alliance, which is expected to lay the foundation for an online trading platform.

The traditional sales model in China is that steelmakers sell steel products to users directly or through steel traders. Usually, the traders and steelmakers sign contracts under which the traders pay in advance to get the steel.

A number of steel traders went bankrupt last year, when steel prices fell sharply to lower than the prices agreed between traders and steelmakers. This has highlighted an opportunity for online trading services since steelmakers still need distribution channels. The early movers will have more chances to win amid industry challenges.

Source: China Metals e-mail