Digital Trade

The future of metal trading is digital

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Opportunities for newcomers to online trading

Whereas major steel traders like Klöckner or steel manufacturers like Thyssenkrupp operate their own online shops, a shop of their own is often too complicated and too expensive for smaller traders. For customers, it is furthermore too time-consuming to have to search different shops in order to compare offers. Newcomers to online trading establish contact between as many traders as possible, including smaller ones, and customers.

“There are in general surprisingly many successful entrepreneurs in the steel trading business who are open to change and are looking for new opportunities for pioneering activities,” says Stefan Grethe. Before the young entrepreneur established an online marketplace for steel in 2014 with the start-up company Mapudo in Düsseldorf, he worked for the Thyssenkrupp steel trading operations. “As project manager, I analysed the customer and order portfolios of nine sales companies in Europe, the USA and Asia and discovered that the situation is the same all over the world and there is considerable digitisation potential in stockholding steel trading.”

The response to Grethe’s answer from the steel industry varied. “Many found the approach very good, while others thought it came too early or rejected the concept categorically.” Even large market players like the global steel pipe manufacturer Vallourec are among the partners in the online marketplace for materials today. “It is very evident on the supplier side that steel and non-ferrous metal traders have become much more open to the idea of selling via online marketplaces,” Grethe is pleased to report. The customers come from many different industries, from fitters to steel and metal builders and from medium-sized industrial companies to large industrial maintenance groups. “What they all have in common is that they need to procure materials quickly and simply, in order to have more time for activities that add value,” the Mapudo founder says and points out that developments in the second half of 2017 in particular were very encouraging. The total transaction volume was higher than expected. Further services like machining are to be added in future. “The initial steps in this direction have been taken with mitre cutting and sheeting with customised dimensions, but a great deal still needs to be done,” Grethe admits. To him, the fundamental rule is: “Where we can create added value, we will develop new functions in liaison with suppliers and buyers.”

Alternative styles of ordering are emerging

Jürgen Wixler, Director of “Alloys2b” in Munich, has modelled his operations on the way social media work. “Alloys2b” has focussed on steel mills and foundries that need master alloys, alloys and non-alloyed material. “We started with a marketplace and very quickly developed into a software-as-a-service (SaaS) solution,” explains Wixler. “Alloys2b” operates on the basis of the principles of a private tendering platform: Buyers compile their own supplier pool, with whom they trade, and the invitations to tender go only to these suppliers. Comparable to a friendship request on Facebook, customers can invite new suppliers by e-mail and thus test the first stage of future co-operation, before expensive background checks are made. In this context, the system acts as a fast, digital communication channel between the participants. “The special features of 'Alloys2b' are simple operation and product customisation – an in-house development,” Wixler promises. “This enables standard products to be found and, if necessary, adapted to individual requirements, or complex products can be created – all without the need for familiarisation or prior workshops.”

Wixler has developed the system into a kind of social media platform for business customers. The extended platform is already online as a trading system for agricultural buying and selling. “At the moment, we are looking for partners to introduce the new trading system in the metal industry.” Wixler is convinced: “We believe that the future of metal trading lies in an open platform and not in isolated solutions.”

To come back to the initial question: What will the future of steel trading be like? Everyone agrees: “The future of steel trading is digital”. While there is further agreement that the winners will be the traders who have been quick and purposeful in the digitisation of their processes.

It is, however, also possible that many steel traders will no longer be needed at all in future. In the Industry 4.0 era, developments will lead to digitisation of the entire supply and added value chain. In smart factories, stocks and machines are connected to each other directly via the Internet of Things (IoT). If the system identifies that the steel available on the production machine is running out, an order is placed – with the steel trader or directly with the steel mill.

What sounds futuristic could soon become reality. That at least is what the start-up company, Axoom, which has created a complex Industry 4.0 ecosystem, thinks. The company from Karlsruhe was established by the machine tool manufacturer, Trumpf. Its partner in this venture? The steel trader, Klöckner.