Connecting buyers and sellers of damaged steel goods is
hardly an easy feat, but two businesses born in steel's dot-com
era have found success in buying, marketing and selling
secondary steel products.
SteelSalvor LLC, Houston, auctions steel and other products.
The company is run by Scott Downs, who got his introduction to
the steel business in a somewhat unconventional manner. Instead
of beginning in a steel mill and working his way up, he got his
start in more of an outpost than a management post. But now, as
president and chief executive officer of SteelSalvor, he has
been able to gain a perspective on the market for secondary
steel-the products rejected by end-users, mills, service
centers and traders as unusable but which still must find a
Downs was a marine cargo surveyor, whose job included
inspecting steel imports-in effect, serving to make sure the
products weren't damaged. Sometimes they were, and in those
damaged products he found a new career.
"What I did was inspect the steel coming in to see if it was
damaged," he said. "If it was, I filed a report, sort of like
an insurance investigator. The damaged steel would then be
segregated from the cargo and sold in a closed-loop process. We
really didn't need to do any marketing. We just had people we
knew who were looking for steel.
"We started to wonder how much more value there might be to
the steel if we could find some buyers," he recalled. "We found
out it was a pretty competitive market. People were willing to
put in competitive bids." Thus was the birth of
Steel Spider, created by John Babson, also was created as a
way to link buyers and sellers of prime, excess and secondary
Babson came to the secondary steel market in something of a
different manner. He spent 30-plus years with Westinghouse
Electric Co. LLC, but often spent his spare time pursuing his
hobby as something of a computer expert. He was merely surfing
the Internet, looking at different Web sites, in the late 1990s
when the steel industry, like other global industries, was
falling in love with the dot-com phenomenon. Babson saw an
opportunity in the Web. "I wanted to start a company, and I
thought this was really the only way to start one when you
don't have a product," he said. "Steel was kind of foreign to
me. I didn't know much about it when I got involved."
Now, a little more than 10 years later, the two businesses
stand as some of the last vestiges of steel's dot-com era.
"When I started (Jan. 1, 1999) there was MetalSite, e-Steel
and some others out there. Now they're all gone. They all kind
of went by the wayside. But we're still here. We must be doing
something right," Babson said.
Both men have found success with their businesses, which
share similarities but also differ markedly.
Downs explained that each week SteelSalvor-whose customer
database has grown to more than 10,000-notifies its members of
steel products in which they might be interested. Being a
member of the community is free, but SteelSalvor charges
service fees of 5 percent of the winning bid to sellers upon
facilitating an auction that produces a sale above a minimum
Auctions are on an f.o.b. basis, current location.
Successful bidders must transport their steel once they have
paid for it.
"We don't take a position," Downs said. "We don't buy or
sell. We provide the auction service to, say, a service center
looking to sell excess or obsolete inventory or a distributor
looking to sell a position. We're facilitators who try to bring
the two sides together in the auction."
Service centers are major suppliers of steel to SteelSalvor,
Downs said. Many have what he called "niche or off-spec"
product they can't sell to their standard customers.
The automotive market has no tolerance for damage," Downs
said. "You might have a coil with just a small bit of rust on
it. An HVAC (heating, ventilation and air conditioning) guy
might be able to use that in an area that is not exposed. No
one even knows (a rust spot) is there. But the challenge
sometimes is putting that buyer together with that seller."
Babson takes a similar approach with Pittsburgh-based Steel
Spider, which is part of Mountain Hawk Corp., a corporate name
established by Babson for several businesses in which he is
Steel Spider attempts to establish connections between
buyers and sellers of excess and secondary steel via four
separate platforms. Confidentiality is maintained because
transactions occur off-site and with no involvement from Steel
Spider. Revenue is generated from sellers through listing fees,
lead referral fees and advertising fees.
Its four platforms include searchable inventory, e-mail
offerings by sellers, inquiries by interested buyers and a
facility directory. The searchable inventory essentially lists
items in stock that are available from steel sellers and
includes a "find" button that matches a buyer's requirements
with what a seller has available. The offering platform allows
a seller to send e-mail alerts to multiple buyers, while
inquiries works in the opposite way, allowing an interested
buyer to e-mail multiple sellers. The facility directory, which
contains locations, capabilities and materials used or
processed by a seller's facility, can be sorted by company
name, material handled or processing capabilities.
"We work with a lot of people looking to move excess prime
or secondary steel," Babson said. "It's hard for me to say how
much is sold because we keep the transactions confidential. We
don't work as brokers. We're not interested in that
relationship. This is almost purely an advertising model-people
are paying to advertise their steel-but it is a model that
allows the transactions to remain private and