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The steel supply chain in China is undergoing a major transformation. Currently, the steelmakers’ most popular method of supplying material to the market is by selling through independent trading companies to the users of the product. This is cumbersome and results in minimal contact between supplier and user of the material. It, therefore, stifles product development.
However, a new and quite radical system of steel distribution has taken hold. A number of major steel companies have collaborated with e-commerce platforms to set up a method of selling steel direct to customers.
It is reported that almost ten percent of all steel sold in China is now generated through internet platforms. This is a remarkable transformation in the method of procurement in a relatively short period of time. This new method is proving very popular but does not solve all the distribution problems.
In recent years, the China Iron and Steel Association (CISA) has been pressing for an overhaul of the existing method of steel distribution. Internet purchasing may go part way to resolving some of the difficulties. It could bring the steel mills and steel users closer together. This has to be a good thing if this develops an understanding of their respective needs.
One of the biggest problems with the traditional system is that it creates an extra layer of inventories throughout the supply chain than is absolutely necessary in many cases. Documentation is duplicated and material handling can be excessive. This may change little but the mills would be more in control of the stock levels and not the distributors.
