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Internet platforms can help resolve the overcapacity problems of the nation’s steel industry, which is burdened by losses as it copes with a slowing economy, according to senior officials.
Gan Yong, vice-president of the Chinese Academy of Engineering and chairman of the China Iron and Steel Research Institute Group, said last week during the two sessions that some leading domestic companies such as Baoshan Iron and Steel Co, the nation’s largest listed steelmaker, is investing in such an Internet platform.
These sites can be a gathering point for the steel producers, as well as the suppliers, end-users, financial institutes, technology providers, designers, trading companies and logistics organizations that serve the sector.
Such Internet platforms “will solve the information imbalance in the steel industry, which can raise efficiency and reduce intermediary costs”, Gan said.
Gan said that China has more than 200,000 steel traders and about 4 million enterprise users.
“The huge number of traders … raises the costs of the business,” he said. “Based on big data, the platform can better serve all the participants of the steel business.”
As steel companies increasingly sell products directly to users and order logistics services on the platform, the database will grow and it will be used for mills to plan the scale and breakdown of their output, Gan said.
“The open statistics of the platform will help the industry find its supply-demand balance and solve the overcapacity problem,” he said.
Such a platform costs more than 2 billion yuan ($320 million) to establish, said one anonymous industry insider. The source said that in addition to Baosteel, some other steel mills and large trading companies are working together on similar Internet platforms, but obstacles remain.
“Getting producers and traders to use such a platform and share information on it is the first difficulty,” he said.
However, Gan said that such platforms will be fully developed within three to five years.
“Affected by weak downstream demand caused by China’s economic slowdown, many steel traders are verging on bankruptcy. This is an opportune time for large steel companies to acquire these traders to obtain their databases, which can be used for platform building,” Gan said. “A full database will require about 10 years to complete.”
On Sep 15, Premier Li Keqiang mentioned the concept of the “Internet Plus” when delivering the annual Government Work Report.
He said that China will develop the “Internet Plus” action plan to integrate mobile Internet, cloud computing, big data and the Internet of Things with modern manufacturing. The nation’s goal is to encourage the healthy development of e-commerce, industrial networks and Internet banking.
Gan said this is an opportunity for China’s steel industry, which has low profitability. He said that the “Internet Plus Steel” mode will change the steel industry .