Consolidation is coming to the metals industry: B-to-b marketplaces MetalSite Inc. and MetalSpectrum this month agreed to work together rather than compete.
Pittsburgh-based MetalSite was a so-called coalition marketplace before such constructs became popular. Launched in 1999, the siteâs investors include large steel companies Bethlehem Steel Corp., LTV Corp., Ryerson Tull Inc., Steel Dynamics Inc. and Weirton Steel Corp.
MetalSpectrum, meanwhile, is one of the wave of brick-and-mortar-backed newcomers to the e-marketplace sector. The company, founded just this May, is backed by a bevy of metals companies, including Alcoa Inc., Allegheny Technologies Inc., Reynolds Aluminum Supply Co. and Kaiser Aluminum Corp.
The two have crafted a deal that--at least for now--stops short of a merger but finds the two industry marketplaces sharing customers and cooperating on supply chain applications.
ââThe joining of independent and coalition marketplaces brings liquidity to the indie faster and time to market for the coalition,ââ said Tim Clark, b-to-b analyst at Jupiter Communications Inc. ââSince MetalSite isnât a true independent, this cooperation doesnât quite fit that model. But itâs clearly the most prominent Net market pairing to date.ââ
MetalSite president-CEO Patrick Stewart said heâs known MetalSpectrum CEO Alan Turfe ââfor a long-time,ââ and the two men ââsat down and talked about the philosophy of the two companies and how we could work together to build solutions for the same customers quicker, faster and cheaper.ââ
The two industry-owned Net markets seem to fit together well. MetalSite focuses mainly on prime and formed steel, while MetalSpectrum focuses on aluminum, stainless steel, copper and brass.
The partnership is in its earliest phases and executives from the two companies seem to view it in a slightly different light.
To merge or not to merge
Stewart said a merger remains a possibility at some point. ââAt this time it makes a lot of sense to walk before you run,ââ he said. ââThereâs no need to merge; both companies are well-funded.ââ But, he added, ââitâs a logical assumption in the future that anything might be looked at.ââ
For MetalSite the deal represents just ââone piece of a larger strategy,ââ and ââa fairly small portionââ at that, said Bob Trotter, MetalSpectrumâs VP-sales and marketing. Trotter also said the MetalSite deal ââmay be a short-term solution.ââ
ââI donât feel at liberty to reveal our commercial strategy at this time,ââ Trotter said. ââBut we are interested in being the single-source solution for the metals industry.ââ
Indeed, MetalSpectrum seems to be broadening its sights beyond specialty metals. In a press release touting its first beta transactions last week, it slipped in the line: ââIn the future, the site expects to release functionality covering additional metal products (such as carbon steel, titanium and scrap).ââ
A broadened product focus would find MetalSpectrum crossing paths more directly with its new partner MetalSite, as well as other e-marketplaces such as e-Steel Corp.
MetalSpectrum is undoubtedly moving very aggressivly. Since its May launch, the company has signed on key executives, chosen vendor partners--Ariba Inc. and i2 Technologies Inc.--and conducted its first transactions.
Last week, Thyssen Inc. purchased 20,000 pounds of aluminum from Kaiser Aluminum through the MetalSpectrum marketplace. That transaction was a binding deal, but still represented a ââtechnology testââ of the system. MetalSpectrum expects to go fully live in the early fourth quarter.
ââWe think weâve been moving fastest among b-to-b verticals,ââ Trotter said.
For its part, MetalSite sees a joint technology development deal with MetalSpectrum as benefiting all the players in the industry. In particular, the two companies will team in an area that MetalSite has up to now only dabbled in: advanced supply chain collaboration among metals industry trading partners, Stewart said. Working together on this tough problem will save ââboth of us a lot of time,ââ Stewart said.