Armed with US$5 billion worth of commitments for trading over the next two years from some of the world’s largest steel producers, the Global Steel Exchange (GSX) is scheduled to begin trading this week.
The new global online marketplace will allow registered buyers and sellers to trade more than 50 steel products, ranging from raw products to finished steel. GSX will focus on interregional spot trade, which accounts for 10 percent of total steel trade. The exchange also will offer fully packaged trading services such as order fulfillment.
Despite the recent string of failures in the public exchange space, Lou Schorsch, president and CEO of Chicago-based GSX, said his company has learned from the mistakes of others.
As opposed to taking the “build it and they will come” approach, GSX already has lined up trading commitments from its participants, he said. In addition, the founding members are investors in the exchange, Schorsch said.
“We will have a lot of volume, several times what the next largest site will have,” Schorsch said. “No other site is focused on the interregional market. If you’re focusing on a regional market, most of the buyers and sellers know each other already. The value of the Internet is there is a lot less than the market we’re focused on. We think we already have as investors about 40 percent of the liquidity that’s in this market.”
Because international steel trading opportunities constantly change, reliable information is critically important, according to GSX officials. Yet global buyers and sellers suffer from murky information, which means regional markets are plagued by unstable inventories, ignorance about availability of trading partners, underselling, and overpricing. GSX is designed to allow buyers and sellers to make decisions based upon factual information.
The founding companies of GSX are Duferco SA, in Lugano, Switzerland; Cargill Inc., in Minneapolis; Samsung Electronics Co. Ltd., in Seoul, Korea; and TradeARBED SA, in Luxembourg.
In addition to these founding members, 13 steel mills from around the world have committed to trade on the exchange. Limited trading is scheduled to begin on the exchange on Wednesday, with the site opening for full trading next month.