Steel firms go online to reduce costs

E-commerce took off in the steel sector in 2013 as the ailing industry competes to cut costs, Dong Baoqing, an official at the Ministry of Industry and Information Technology, said at a -forum in Shanghai on Sa-turday.

Business-to-business (B2B) e-commerce has progressed fast in the steel industry, with more than 30 online steel tra-ding platforms so far in China, Dong was cited as saying by a Xinhua report on Sunday.

Dong also noted at the forum that total e-commerce transactions topped 10 trillion yuan ($1.65 trillion) in 2013, of which 8 trillion yuan was B2B.

Industry insiders said that the continuous low profit margin in the steel industry has forced traders to try online sales channels in a bid to reduce cost and improve profits.

In the first 11 months of 2013, average profit margins in the sector were only 0.48 percent, which means steel mills could make about 28 yuan profit on each ton of steel, according to China Iron and Steel Association (CISA) data.

The profit data for December has yet to be released.

"Many steel makers and third-party steel traders are currently eyeing e-commerce, which has been a new sales channel for the sector," Qu -Xiuli, a deputy secretary--general at CISA, told the Global Times on Sunday.

Leading steel company Baosteel launched an online -trading platform in May 2013, and so far total transactions on the platform have topped 1 million tons.

Guangdong-based Europol, which operates an online steel trading platform, has won approval from the securities authority to list on the Shenzhen bourse.

"Online trading could help steel companies reduce costs, shorten the distribution chain as well as reach more clients," Wang Guoqing, a research director at Beijing Lange Steel Information Research Center, told the Global Times on Sunday.

Wang said that steel sales used to involve many layers of traders, but now e-commerce has connected steel makers directly with end users, or at least significantly shortened the distribution chain.

"Steel e-commerce still has great growth potential, given that a steel trading platform usually only covers a certain geographical area," Wang said, noting that traditional traders who failed to innovate may get weeded out in future.

Despite the benefits, experts noted e-commerce could not bring about a fundamental improvement to the ailing -industry.

The fundamental solution still lies in the elimination of outdated capacity in the sector, Qu noted.