NEW YORK A group of U.S. and Canadian independent steel reinforcing bar fabricators has launched a steel purchasing cooperative aimed at leveraging purchases from steel suppliers and keeping small market players more competitive along the cost curve.
"What (fabricators) gain is the understanding that theywith their volumecan extract a better relationship with their suppliers," Chris Casey, executive director of the group, told AMM. "We give them an extra tool and an extra piece of leverage to affect their bottom line."
The co-op, called the Independent Steel Alliance (ISA), was formally incorporated in May and officially launched Jan. 1. Its members account for more than $500 million in purchases, including rebar, wire mesh and bar supports, the group said.
Fabricators make an initial equity investment in the ISA to become members and then buy from suppliers in the ISA network. Once the group of buyers reaches a certain purchasing threshold, the group will earn a rebate on its purchases. The ISA will aggregate total purchasing and send each member a rebate based on the volumes and types of purchases each member made.
Casey said that suppliers and fabricators both win: steel suppliers will get better volumes from a reliable group of preferred customers they have established relationships with through the ISA, and fabricators will receive a rebate for buying from the suppliers in larger total volumes.
"We offer an opportunity to suppliers to have access to a very highly motivated group of buyers," Casey said. As for the fabricators, "at the end of the year they get one check that is representative of all the rebates theyve participated in."
Casey declined to disclose the price of joining the ISA, but said it was significant enough to encourage fabricators to target a healthy rebate to match their initial payment.
The ISA is seeking a wide range of suppliers and fabricators, Casey said, declining to list specific companies that are involved but noting that independent rebar fabricators represent more than 45 percent of the rebar market.
Now that its been officially launched, the ISAs next goal it to leverage its fabricators purchasing power and continue attracting members and suppliers, Casey said. "Its sort of that field of dreams: build it and they will come. Do we have to build a supply network before members will join, or is it the inverse? Or do we have to get the members on board before the suppliers will join? We think its both."