US outpaces UK as steel sector adopts e-trading

The UK steel sector lags behind international competitors such as the US in take-up of e-business, a study co-sponsored by the DTI and leading UK steel-related organisations has found.

A lack of understanding of the opportunities of e-business was highlighted by research covering 120 companies – from scrap suppliers to steel makers, component fabricators and end-users – carried out by Hatch Beddows for the Steel Association and four other steel-related associations.

`With monthly sales exceeding £750m, the UK steel sector has massive potential for using e-business, but web-enabled trading has been slow to take off,’ said Dr Michael Walsh, project manager for the study at the UK Steel Association.

The report shows adoption of traditional electronic data interchange (EDI) is well established in larger steel-related firms, with online steel sector sales expected to grow from about £110m a month to £250m a month by 2002.

An estimated 35% of companies across the sector have some form of EDI, `but only 15% of the total value of transactions was conducted using EDI and use varies considerably along the supply chain’, said Walsh.

In the US, web-based steel sales average about $80m a month, and investment house Morgan Stanley Dean Witter estimates that $4bn of steel will be traded world-wide by 2004. `Within Europe there is practically zero steel trading on the web at present but this is about to change radically,’ said Walsh.

There are well over 30 new steel-related e-trading exchanges, with new ones being introduced practically every day. Several European steel companies are due to go live this month with facilities for e-trading, including Luxembourg-based Arbed and French steel giant Usinor. Thyssen Krupp has been working on an e-trading exchange for flat-steel production since February, but Corus has yet to announce any e-trading plans.

When it comes to e-business, the long and complex supply chains found in the steel industry will require new levels of co-operation at all levels, according to Walsh. `E-business offers significant opportunities in terms of cost savings, extended reach and flexibility, but there needs to be a change in the industry culture to respond to these opportunities.’

The report says: `The need for rapid change is counter-intuitive to the sector’s traditional investment culture, where capital investment is assessed for a 20-30 year life cycle.’

E-business in the UK Steel Sector is available from the website: www.uksteel.org.uk/ecomm.htm

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