Analyst boosts steel hedging

By Staff -- Purchasing, 4/5/2001

Steel industry economist and analyst Charles Bradford suggests that "one especially interesting possible solution to some of the steel industry's trade issues" could be the online trading program being developed by Enron Corp. (www.Enrononline.com). If steel is traded like a commodity (such as aluminum and copper) and the price is roughly the same on a worldwide basis, there would be no "dumping" and possibly less volatility in prices, suggests the president of Bradford Research. (At present, Enron is trading steel by using PURCHASING Magazine's monthly transaction prices for hot-rolled sheet.) "What differentiates the Enron system from the other e-commerce solutions is that Enron is buying the steel from the sellers and selling it from their own account to a steel user. By comparison, "the B2B trading schemes simply put the buyers and sellers together, a marketing function." With Enron acting as the principal in the transaction, "there will be much more transparency and no rational reason for not getting the full price, just like aluminum and copper," says Bradford. "The product would become hedgeable and long-term price stability could be achieved."