Steel is hard. So is the growing competition among Web-based metals exchanges.
This week, Steel24-7, the new European metals exchange, will announce that it has selected Asera to provide the electronic commerce engine for its Web site. The announcement appears to indicate that Steel24-7 — a project unveiled last June and backed by some of Europes biggest steel producers — is nearly ready to start up.
The exchange — backed by Arbed and partner Aceralia, as well as Corus, ThyssenKrupp Steel and Usinor — will likely provide significant competition to the other players in the sector, including e-Steel, MetalSite and MetalSpectrum. In all, about 70 existing or planned electronic marketplaces are aimed at the metals sector. The Steel24-7 site has been delayed because of European regulators concerns about the market dominance of the sites backers. The four companies, with combined 2000 sales of $80.6 billion, control about 70 percent of the European steel business.
The global steel business is worth some $700 billion per year and is fiercely competitive. Analysts predict much of the sectors trade will migrate to Internet exchanges to reduce transaction costs and streamline supply chain problems.
The announcement that Steel24-7 will use Aseras software is a big win for the privately held Belmont, Calif., company, which builds and operates exchanges on an outsourced basis. Although its far smaller than Ariba and i2 Technologies, which specialize in electronic exchanges, Asera has won several high-profile contracts in recent months, including a mid-April deal with British Petroleum. Asera will provide the software platform for the oil companys commercial fuel exchange, BPDirect, a private exchange that provides fuel purchasing options to the commercial sector.
Although Steel24-7 didnt release the terms of the Asera deal, sources said it is a "multimillion-dollar agreement" that covers several years. Asera, which raised $115 million in venture capital last summer, has some high-profile executives, including President Rohit DeSouza, formerly vice president of business-to-business exchanges at Oracle. Ray Lane, Oracles former No. 2 man, sits on Aseras board.
Paul Gourlet, Steel24-7s program director, said Asera won the contract because it could "concentrate resources, start quickly and deliver effectively. Thats not so easy to get."
Although the deal may provide a boost to Asera, some domestic steel producers doubt Steel24-7s launch will make much difference. "My guess is that they will play a major role in Europe. Thats their focus," said Glenn Pulianas, coordinating director of e-commerce at National Steel in Mishawaka, Ind. Pulianas predicted most American steelmakers would continue doing business with e-Steel and MetalSite.