It was inevitable! They sell virtually everything else on the internet. Now it’s steel’s turn.
Today, thanks to SteelSalvor.com, you can now buy salvage or excess basic steel products – from galvanized coils to re-bar – by bidding for the quantities you need over the ‘net’.
“We’re really the Ebay of the steel industry,” explains Scott Shapiro, CEO of SteelSalvor LLC, Narberth, PA. He tells how the company, through its database of over 5000 buyers and sellers, can put the parties together at a live auction where they can bid for the products over the internet. “We can also link them by phone and fax at the same time if they prefer. The bottom line is these are interactive transactions.”
Taking A Lead From Ebay
About four years ago, a couple of entrepreneurial executives recognized the potential for broadening the market for secondary steel distribution via the internet. “We knew a lot of steel, including salvage, order overruns, market rejections, damaged or otherwise rejected material was moving through the distribution chain. We also knew it was moving maybe with exposure to typically a half-dozen or so companies per transaction. We developed a carefully prepared database which would open these markets to thousands more buyers and sellers,” Shapiro added, “and while I wouldn’t say we are an internet company, we are a marketing company that uses the internet.”
“Now, a company in Tulsa, for example, can learn of another firm in New Jersey that needs just what he has in stock. Via SteelSalvor, those companies can market to a much broader audience of both buyers and sellers compared to a relatively few as in the past.
“I had seen tremendous wealth being created at the expense of insurance companies, steel mills and service centers in that their ability to sell their secondary material at a premium price or fair market value did not exist. These disadvantaged situations created a real opportunity for brokers – or other distributors – to acquire these
materials at below market format and sell them at premium prices,” he says.
Another strength of the internet is its visual capabilities via the electronic format. Potential buyers become participants in a live auction where before this was not possible. “We can get everybody, anywhere in the United States, in one place and at one time, enabling them to study the product description, the mill certifications, as well as digital images of the product, providing them with a clear understanding of the material they are bidding on,” Shapiro adds. “It’s a very valuable tool for both buyers and sellers giving them the opportunity to bid on material that ordinarily they would never have exposure to. And we stand behind every transaction.”
On a specific lot of steel, here’s how it worked in one recent case. A cargo of cold-rolled coil came into the U.S. at a prime price of $34 per hundred weight. The original trading company was not willing to accept the metal in its condition because he felt it was not prime, but he was considering what is known as a retention offer at $18 per hundred weight. On behalf of the insurance company and the trading company, SteelSalvor posted the material on the web site, conducted an auction and got 172 bids, and sold the same steel – in its damaged condition – for about $33.50, reducing a $250,000 claim in favor of an $8,700 claim. This was a win-win for everybody involved, and the trading company avoided a boost in insurance premiums to boot. It’s a good example on the marine insurance side.
Demand and Supply, Always There
“When you think of it,” Shapiro notes, “ there is a tremendous amount of excess, reapplied and secondary supply either floating around or warehoused somewhere in the United States. Now, on behalf of major service centers and distributors we take that excess or slow moving material, the condition of which is much better than salvage, and we can market it to a much broader customer base.
“We’re now finding that service centers – say the top 50 to 100 – buy an extraordinary amount of material from each other. SteelSalvor did a recent transaction
composed of 13” drop cuts in galvanized, in prime condition, between one service center in Oklahoma and another in Baltimore. The east coast firm had no idea that item was available and were able to buy it at a discount to current prime pricing. They were able to fill their spot need while the Oklahoma firm unloaded inventory that they had no use for.”
SteelSalvor sees this market as among the fastest growing in the business; putting the slow moving products into the hands of those who need it, and at maximum market value.
“With the coil coaters, it works in a similar fashion,” Shapiro is quick to add. “At times they are looking for coils and sometimes they need to move material on hand because of cancelled orders or whatever. We are a really good spot buy opportunity.”
…And It’s Not Just Steel
Currently, SteelSalvor is handling about 80% of its volume in carbon steel and about 15% in stainless. However, they have done some transactions in aluminum and nickel alloy plate. They are prepared to expand the business wherever the opportunities take them in the metals world. “The data base is the lifeblood of our company,” Shapiro emphasizes. Currently, the company operates in the U.S., Canada
SteelSalvor has reached a volume of around $1,000,000 per month, and conducts five or six auctions per day with the most popular being the ‘blind’ auction. This volume is about double what it was just a year ago, and auctions are up from one or two a week to the current daily figure. Service fees are 5% of the winning bids. The company is experimenting with other electronic transfer methods. It maintains offices in Houston, TX, and Narberth, PA.
One of the company strengths is that it understands the markets it penetrates, and as its database expands so does its area of expertise. Currently, the company is developing a sophisticated software package for its service center and mill clients that will enable them to sell lots of line items by ‘an interesting method.’ “We want to become the number one brand in the excess material world. We know that if we do the right thing consistently, customers will come back,” Shapiro says confidently.
All of the companies in their database either buy or sell prime excess or secondary metal. It is estimated that better than 95% of all the companies in the steel industry today use e-mail, so the potential for growth is extremely attractive. “I just read somewhere that Ebay volume has reached $32 billion per year, so the business model has proven to be successful,” he adds, “and I see no reason why it can’t be every bit as successful for steel.”
“For anyone interested, we can be easily reached on the web at www.steelsalvor.com or call 610-664-0208. We look forward to visiting with you on the ‘net’ ”.