Feb. 24 (Bloomberg) -- Russians have embraced online commerce with orders of music, movies and jeans. Now, add to the web shopping list items such as pipes and rolled coil from the country’s biggest steel producers.
Online orders from OAO Severstal’s catalog of must-have items for construction have jumped at least 10-fold since 2012. Customers of rival OAO Magnitogorsk Iron & Steel clicked on 70 percent more Internet purchases last year.
That take up is even faster than the pace that shoppers are turning to the web: online sales in the country advanced by more than one-fourth to about 510 billion rubles ($14 billion) last year. Russian steel demand growth is outpacing the rest of Europe as a boom takes hold in building, an industry partly supplied by smaller traders who are increasingly buying their supplies online, said Kirill Chuyko, an analyst at BCS Financial Group in Moscow.
“It saves time and we have less paperwork to do, which is convenient,” said Alexey Tikhonenko, a manager at Moscow-based trader Intermetgroup, a buyer of steel from both Russian producers. Severstal, Russia’s No. 2 producer, requires web customers to order at least 65 metric tons. MMK, the fourth-biggest, insists on a minimum of one ton.
Internet-based purchasing is gaining popularity too in China, the country that is the largest consumer of the metal. China has more than 30 online traders in the metal, the Xinhua News Agency reported last month.
Online sales work best in countries where there are large distances between the mill and customers or middlemen who increase the cost, according to Peter Fish, founder and managing director at Sheffield, England-based steel market analysts MEPS Ltd. “In Europe and North America the majority of purchases are made direct.”
ArcelorMittal, the world’s biggest steelmaker, has a “minor e-platform business for selected customers,” it said in an e-mailed comment. OnlineMetals.com, a unit of ThyssenKrupp AG, Europe’s second-largest steelmaker, conducts web-based sales from a warehouse in Seattle, according to the company’s website. The World Steel Association doesn’t keep figures for online sales, Soo Jung Kim, a spokesman, said in an e-mail.
Severstal said online sales from its smelter at Cherepovets, the city between Moscow and St. Petersburg where the steelmaker was founded, have risen from no more than 1,000 tons a month in early 2012 to 10,000 tons now. That’s still just 1 percent of the unit’s monthly sales. “There is a huge potential for this service’s growth,” said Dmitry Goroshkov, the local head of sales.
MMK, as the Magnitogorsk-based company is known, registers about 1,000 people for online sales each month, said spokesman Sergei Vykhukolev. Customers like the shorter time between their orders and deliveries, he said.
Evraz Plc, the biggest steel company in Russia by production, and OAO Novolipetsk Steel, which ranks third, plan to follow Severstal and MMK by opening online sales platforms this year, they said Feb. 18.
Russian demand for steel used in construction increased to almost record levels last year, according to Morgan Stanley. That helped total steel demand in the country and the former CIS states climb by 2 percent, even as it declined by 2 percent in the European Union.
Severstal has dropped 16 percent in London trading this year, MMK has lost 20 percent, NLMK 14 percent and Evraz 29 percent.
The steelmakers offer the same range of products online as they provide more conventionally -- from hot-rolled coil to rebar and pipes. Clients click to place their orders, commit to a contract, make the payment and then wait for delivery.
While popularity is growing, there have been a few glitches. “I didn’t use online shopping for a couple of months as there were some technical problems,” said Sergei Ionov, a manager at Moscow-based steel trader Tekhnolux-N and a Severstal customer. “Sometimes it’s more convenient to send an order to a sales manager directly by e-mail.”
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