This Year’s Model

While independent exchanges are stalling, industry-led trading hubs are gaining in popularity. Here's what we found when we examined E-marketplaces in four industries: metal, chemicals, paper, and energy.

But that’s next year’s model.

Tim Reason is a contributing editor at eCFO. Additional research by Erik Selakoff.

Metal

Big Picture: Two story lines here. First, consortium-led sites are struggling because their old-economy backers (namely, steel companies) are struggling. Second, a number of independent E-marketplace sites pulled a Houdini by altering their business models.

MetalSite (www.metalsite.net)

Details: Consortium. Went live December 1998.

Skinny: Original owners were Weirton Steel, Steel Dynamics, and LTV Steel (which declared bankruptcy in December). A large portion of Weirton’s ownership in MetalSite was recently bought for $180 million by exchange provider Internet Capital Group. Ominously, ICG itself laid off about a third of its workforce last November … Site offers commodities pricing directly from LME, as well as NYMEX and COMEX … MetalSite operators are attempting to add logistics and credit services.

E-Steel (www.e-steel.com)

Details: Independent. Went live September 1999.

Skinny: Wins prize for being one of few independent exchanges still surviving in any industry. But there’s a footnote. E-Steel builds and hosts private trading exchanges for its old-economy customers. Granted, those customers can also use public exchange on E-Steel’s site. But that’s gravy, not the meat … Investors include Bessemer Venture Partners and Goldman Sachs … Recently hooked up with DoveBid to provide auction capabilities. Big plus.

MetalSpectrum (www.metalspectrum.com)

Details: Industry consortium. Went live October 2000.

Skinny: Whereas heavyweights E-Steel and MetalSite evolved from the steel industry, this consortium site handles multiple metals … Exchange has plenty of big industry brass behind it: about 20 backers and investors representing the full metal spectrum. List includes Alcoa, Reynolds Aluminum Supply Co., North American Stainless, Allegheny Technologies, and Kaiser Aluminum. As far as we know, bandleader Kay Kyser not involved … In September, executives at site announced technology-sharing alliance with MetalSite. Exchange officials insist two marketplaces will remain separate, however. Stay tuned on this one.

Metal Suppliers Online (www.suppliersonline.com)

MetalMaker (www.metalmaker.com)

Details: Independents. Metal Suppliers Online went live February 1997. MetalMaker slated for full launch in Q2 2001.

Skinny: Unrelated sites, both serve smaller distributors and fabricators in metals industry … Metal Suppliers Online boasts network of 2,500 suppliers of specialty and nonferrous metals … Chicago-based Metal-Maker — a molten metals specialist — backed by Lehman Brothers Venture Capital Group, as well as Portage Venture Partners and Mercury Ventures … Recent rise of jumbo, industry-led, vertical E-marketplaces means such specialized virtual trading hubs as these two may prosper. Notes AMR Research’s Eriksen: “If the independent B2B exchanges can find a niche segment that is off the radar screen of the bigger players, they can succeed.”

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