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PLATTS STEEL DISTRIBUTION & SUPPLY CHAIN CONFERENCE ANTWERP, 15 OCTOBER 2013 GEORGES KIRPS, MANAGING DIRECTOR EUROMETAL
CURRENT STRENGTH AND FUTURE COMPETIVENESS OF STEEL DISTRIBUTION IN THE STEEL SUPPLY CHAIN IN EUROPE
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
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STUDY GROUP OF DISTRIBUTORS
OF STEEL, TUBES AND METALS
EUROPEAN ASSOCIATION OF FLAT STEEL SERVICE CENTERS
STUDY GROUP OF STEEL TRADING
COMPANIES
ASSOCIATION OF NATIONAL STEEL DISTRIBUTION
FEDERATIONS
EU STEEL DISTRIBUTION TODAY REPRESENTS: 73 MIO TONS OF SALES
5 000 STEEL DISTRIBUTION COMPANIES 150 000 EMPLOYEES
MORE THAN 1 MILLION CUSTOMERS
EU STEEL TRADERS PLAY A RESPONSIBLE ROLE IN CHANELLING NON EU IMPORTS INTO EU MARKETS
EUROMETAL IS THE VOICE OF EUROPEAN STEEL INTERMEDIATION WITH FOUR MEMBER ORGANISATIONS COVERING ALL TYPES OF STEEL
INTERMEDIATION
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
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STEEL INTERMEDIATION PRODUCERS END USERS
HOME MARKET PRODUCERS
&
FOREIGN PRODUCERS
STEEL, TUBES AND METALS
END USE SECTORS
STEEL, TUBE, METALS STOCKHOLDING
FLAT STEEL PROCESSING
STEEL & METALS TRADING
WITH NAT.FED, DISMET, EASSC AND STSG, EUROMETAL IS COVERING ALL MAIN OPERATIONS OF STEEL, TUBES AND METALS INTERMEDIATION
EUROMETAL NETWORKS INCORPORATE ALL ASPECTS OF STEEL, TUBES & METALS INTERMEDIATION
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
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SMALL ORDERS ADDITIONAL
PROCESSING INCREASING COMPLEXITY SHORT
LEAD TIMES SERVICE AND VALUE
RAPID RESPONSE DELIVERY
REQUIREMENTS FLEXIBILITY
BIG VOLUMES
LONG RUNS
ECONOMIES OF SCALE
STEEL DISTRIBUTION IS THE INTELLIGENT MATCHMAKER BETWEEN STEEL PRODUCERS AND STEEL CONSUMING INDUSTRIES
PARAMETERS OF STEEL PRODUCTION BUSINESS MODEL
PARAMETERS OF STEEL END USER BUSINESS MODEL
PRODUCT AVAILABILITY
DELIVERY IN 24-48 HOURS
PROCESSING SERVICES
LOCAL & REGIONAL FOOT PRINTS
ONE STOP SHOPPING
MULTI- PRODUCT
MILL ORDER LEAD TIMES DELIVERY BY RAIL OR BOAT
NON COMPLEX ORDERS
CLUSTERING ORDERS
PARAMETERS OF STEEL DISTRIBUTION – CUSTOMER SIDE
PARAMETERS OF DISTRIBUTION – MILL SIDE
PRODUCT SOURCING
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
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CUSTOMERS VALUE CREATION
STEEL AND METALS INTERMEDIATING VALUE CHAIN
VALUE
UNIQUE SERVICE
PROPOSAL
SUPPLY CHAIN MANAGEMENT TECHNICAL SUPPORT
FINANCING - IT NETWORK
LOGISTICS - FREIGHTING STOCKING-PROCESSING-TRANSFORMATION
SOURCING - TRADING
HIGH VALUE ADDED
PRODUCTS
COST SAVINGS IMPROVED
PRODUCTIVITY
EFFICIENT MARKETING AND SALES
INNOVATIVE BUSINESS MODELS
UNIQUE SERVICE PROPOSALS BY STEEL DISTRIBUTION HELP CUSTOMERS TO CREATE VALUE
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
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PROXIMITY SUPPLY CHAIN MARKET SUPPLY CORE BUSINESS
4 EMERGING BUSINESS MODELS:
TREND 1990-2010 1980-1990
TREND
BUSINESS MODEL 1960-80
LOCAL PLAYER
REGIONAL / GLOBAL PLAYER
MONO PRODUCT MONO SEGMENT
MULTI PRODUCT MULTI SEGMENT
BUY & SELL
PROCESSING READY TO USE
MARKET FOLLOWER
CUSTOMER DRIVEN MARKET MAKER
DURING LAST 50 YEARS, EU STEEL DISTRIBUTION HAS BEEN IN A CONTINOUS PROCESS OF ADAPTING BUSINESS MODELS TO CHANGING MARKET ENVIRONMENTS
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
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BUSINESS MODELS OF STEEL DISTRIBUTION ARE FOLLOWING THE CHANGING AND DIFFERENTIATED MARKET FUNCTIONALITIES…
…LEADING TO A RATHER LARGE SCOPE OF OPERATIONAL MODES IN STEEL DISTRIBUTION
MARKET FUNCTIONALITIES AFFECT STEEL DISTRIBUTION BUSINESS MODELS IN LOCAL, REGIONAL AND INTERNATIONAL STEEL MARKETS
PROXIMITY BUSINESS FOCUSED ON SERVING LOCAL / REGIONAL MARKETS
MARKET SUPPLY BUSINESS FOCUSED ON LARGE MATERIAL SOURCING FOR SME STOCKISTS
SUPPLY CHAIN BUSINESS FOCUSED ON INTEGRATING INTO VALUE ADDED NETWORKS
CORE COMPETENCE BUSINESS PRODUCT SPECIALIST / SERVICE SPECIALIST ACTING IN NICHE MARKETS
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
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BEAM & PROFILE CENTERS & GENERAL STOCKIST
PLATE PROCESSOR & STOCKIST
HIGH CARBON & ALLOY STEELS STOCKIST
STRIP MILL PRODUCTS SERVICE CENTER
STAINLESS STEEL SERVICE CENTER
REINFORCING STEEL CENTERS
DISTRIBUTION OF TUBULAR PRODUCTS
TYPICAL STEEL STOCKHOLDING
FLAT STEEL SERVICE CENTERS
BASED ON PRODUCT AND SERVICE OFFER, EU STEEL DISTRIBUTION IS RUNNING DIFFERENT TYPICAL OPERATIONAL MODELS ADAPTED TO
SPECIFIC SUPPLY CHAIN REQUIREMENTS OF EACH END USE SECTOR
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE ANTWERP 15 OCTOBER 2013
OTHER 68 %
TOP FIVE 32 %
OTHER 67 %
TOP FIVE 33 %
2012 2006
TOP FIVE STEEL DISTRIBUTORS REPRESENT A 33 % SHARE IN EU STEEL DISTRIBUTION. BUT STEEL DISTRIBUTION IN EU DEVELOPS MORE AND MORE INTO A BUSINESS WITH ABOUT 25-30 REGIONAL CHAMPIONS
% ARE RELATED TO SALES OF EU STEEL DISTRIBUTION
MULTIPLICITY OF OPERATIONAL MODELS IN STEEL DISTRIBUTION IS ONE OF THE REASONS WHY STEEL DISTRIBUTION TODAY IS STILL A VERY FRAGMENTED BUSINESS
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
THE TYPICAL STEEL PRODUCT PORTFOLIO TRADED BY STEEL DISTRIBUTION REPRESENTS 86 % 0F ALL PRODUCTS OFFERED
BY STEEL INDUSTRY IN EU MARKET
BEAMS MERCHANT BARS
REBARS PLATES
STRIP MILL PRODUCTS
TUBES STAINLESS & OTHER ALLOY STEELS
86 % = 114 MT
EU MARKET SUPPLY IN CONSIDERED PRODUCTS : 132 MT
EU MARKET: ALL FINISHED STEEL PRODUCTS OFFERED BY STEEL INDUSTRY
WIRE ROD
RAILS
SHEET PILES
14 % = 18 MT
STEEL PRODUCTS TRADED BY EU STEEL DISTRIBUTION AS WELL AS BY MILLS
ONLY BY MILLS
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
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EU MILLS 87 %
DIRECT
DELIVERIES MILL TO END USER
64 %
36 %
SUPPLY SIDE INTERMEDIATION DEMAND SIDE
STEEL DISTRIBUTION INTERMEDIATES TODAY 64 % OF EU-27 STEEL MARKET SUPPLY,
NON EU MILLS 13 %
EU STEEL
DISTRIBUTION STEEL
DEMAND BY END USER
SEGMENTS IN EU-27
STEEL MARKETS
64 %
36 %
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
FLAT SSC
2011 DELIVERIES BY: STOCKHOLDING DISTRIBUTION MILLS
MARKET SUPPLY: 114 MIO TONS
MAR
KET
SH
ARE
0 %
50 %
1
00 %
RA
ILS
MER
CH
ANT B
ARS
BEAM
S
REBARS STRIP MILL PRODUCTS
PLATES
TUBES
* EXCLUSIVE PRE-MATERIAL FOR REROLLING AND FOR TUBE PRODUCERS
TUB
ES
FLAT SSC
THE FOCUS OF STEEL STOCKHOLDING DISTRIBUTION IS ON LONG STEEL PRODUCTS AND TUBE THE FOCUS OF FLAT SSC DISTRIBUTION IS ON SMP, PLATE & STAINLESS
SOURCE: EUROMETAL UPDATED 12.06.2013 STAIN
LESS
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
EU MILLS ARE PUSHING FOR DOING DIRECT BUSINESS WITH END USERS
39 %
35 %
2010 2011 2012
35 % 36 %
25 %
24 %
40 % 40 % SHARE IN EU STEEL MARKET SUPPLY
DIRDIRECT MILL SALES
DIRFLAT SSC SALES
DIR STEEL STOCKHOLDERS SALES
SINCE 2010, FLAT SSC
LOST SOME MARKET SHARE IN
EU MARKET SUPPLY
26 %
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
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EU MILLS 87 %
DIRECT
DELIVERIES MILL TO END USER
• OEM RESALE
54 %
46 %
SUPPLY SIDE INTERMEDIATION DEMAND SIDE
FLAT SSC DISTRIBUTION INTERMEDIATES TODAY 54 % OF EU-27 MARKET SUPPLY IN STRIP MILL PRODUCTS
NON EU MILLS 13 %
STEEL DISTRIBUTION
HR, CR, COATED • CLEANING,PICKLING • SHEETING • SLITTING • BLANKING • STAMPING • BENDING
END USER SEGMENTS
IN EU-27 STEEL MARKETS
• AUTOMOTIVE SUPPLIERS • WHITE GOODS SUPPLIERS • GENERAL INDUSTRY • METALWARE • PACKAGING
54 %
46 %
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
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EU MILLS 84 %
DIRECT
DELIVERIES MILL TO END USER
• PROJECT BUSINESS
58 %
42 %
SUPPLY SIDE INTERMEDIATION DEMAND SIDE
PLATE STOCKISTS & PROCESSING CENTERS INTERMEDIATE TODAY 58 % OF EU-27 MARKET SUPPLY IN PLATES
NON EU MILLS 16 %
STEEL DISTRIBUTION
PLATES & HR FLATS • SHOT BLASTING • PRIMERING • PLASMA & FLAME CUTTING • DRILLING, PUNCHING • STAMPING, • BENDING • MARKING
END USER SEGMENTS
IN EU-27 STEEL MARKETS
• SHIPBUILDING • WINDTOWERS • YELLOW GOODS • OIL & GAS • MECH.ENGINEERING • CEMENT INDUSTRY • MINING • WASTE RECYCLING • TRUCK BINS
58 %
42 %
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
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EU MILLS 98 %
MILL TO END USER
90 %
10 %
SUPPLY SIDE INTERMEDIATION DEMAND SIDE
BEAM & PROFILE STOCKIST & PROCESSING INTERMEDIATE TODAY 90 % OF EU-27 MARKET SUPPLY IIN BEAMS & PROFILES
NON EU MILLS: 2 %
STEEL DISTRIBUTION
BEAMS, PROFILES, ANGLES, HOLLOW SECTIONS • CUT-TO LENGHT • SHOT BLASING • PRIMERING • EDGING • BENDING • DRILLING • MARKING
MILL TO END USER • PROJECTS
END USER SEGMENTS
IN EU-27 STEEL MARKETS
• STRUCTURAL STEEL FABRICATORS • CIVIL ENGINEERING • MECHANICAL ENGINEERING • YELLOW GOODS • TRAILERS • MINING • ENERGY, OIL & GAS
90 %
10 %
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
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EU MILLS 94 %
MILL TO END USER
81 %
19 %
SUPPLY SIDE INTERMEDIATION DEMAND SIDE
REBAR STOCKISTS & PROCESSORS INTERMEDIATE TODAY 81 % OF EU-27 MARKET SUPPLY IN REINFORCING STEELS
NON EU MILLS: 6 %
STEEL DISTRIBUTION
REBARS, WIRE MESH, DEFORMED BARS EXPANDERS • CUT-TO LENGHT • DECOILING • BENDING • FABRICATING • ALL-IN SERVICES
MILL TO END USER • PROJECTS
END USER SEGMENTS
IN EU-27 STEEL MARKETS
• RESIDENTIAL • NON RESIDENTIAL • CIVIL ENGINEERING • REFITTING
81 %
19 %
SOURCE: EUROMETAL, DATA REFER TO 2012
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
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EU MILLS 83 %
DIRECT
DELIVERIES MILL TO END USER
• OEM RESALE • PROJECTS
58 %
42 %
SUPPLY SIDE INTERMEDIATION DEMAND SIDE
STAINLESS SERVICE CENTERS INTERMEDIATE TODAY 58 % OF EU-27 MARKET SUPPLY IN STAINLESS STEELS
NON EU MILLS 17 %
STEEL DISTRIBUTION
STAINLESS LONGS & FLATS & TUBES • SAWING • POLISHING • PLASMA-, LASER- AND WATERJET CUTTING
END USER SEGMENTS
IN EU-27 STEEL MARKETS
• CHEMICAL INDUSTRY • PHARMA-INDUSTRY • FOOD PROCESSING • AEROSPACE • AUTOMOTIVE • BUILDING • METALWARE
58 %
42 %
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
IDENTIFYING NEW CHANCES IN STEEL SUPPLY CHAINS …BY OPTIMISING BUSINESS PROCESSES
SERVICE OFFER
CUSTOMER REACH
STEEL
DISTRIBUTION PROCESS
OPTIMISATION
TRANSFORMATION COSTS PER UNIT
SITE UTILISATION SHARING OF ASSETS
DEVELOP SERVICE TO MARKET
• PROXIMITY NEEDS • CUSTOMER RELATIONSHIP • OUTSOURCING/ INSOURCING NEEDS
LOGISTICS PERFORMANCE
MARKET INTELLIGENCE
TRANSPORTATION COSTS AND DISTANCES
DELIVERY TIMES LEAN SUPPLY CHAINS 3PL NETWORKING
MARKET GROWTH POTENTIALS IDENTIFY GROWING REGIONAL MARKETS EXPLORE NEW NICHES & MARKET SEGMENTS
OPTIMIZING ALL STEEL SUPPLY PROCESSES IS A KEY SUCCESS FACTOR FOR STEEL DISTRIBUTION
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
STEEL DISTRIBUTION STRATEGIES REGARDING THE “NEW” STEEL SUPPLY CHAIN CHALLENGES
SOURCE: McKinsey
STRATEGIC AVENUES ANTICIPATED STEEL DISTRIBUTION DEVELOPMENTS
SELL BEFORE BUYING
▪ TO MAXIMIZE CASH POSITIONS, INVENTORY LEVELS PLAY A KEY ROLE. ▪ DO NOT PURCHASE MATERIAL BEFORE SIGNING A CUSTOMER TO BUY IT. ▪ ENHANCE CROSS DOCKING MATERIAL FLOWS
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MANAGE VOLATILITY
▪ LIMIT VOLATILITY EXPOSURE OF TOO HIGH STOCKS ▪ USE FUTURES TOOLS TO MANAGE PRICE RISKS ▪ ADAPT SALES AND PURCHASING CONTRACTS IN A WAY TO COPE WITH
VOLATILITY EXPOSURE
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COPE WITH RISING PRICES
• ENHANCE SERVICE SOLUTIONS TO HELP USERS TO REDUCE MATERIAL INPUTS BY MARKETING CUSTOMISED ADDED VALUE SERVICE
• LEVERAGE PURCHASING POWER BY ACQUISITIONS, JV AGREEMENTS, ETC • ENHANCE MARKET INTELLIGENCE TO PROVIDE COMPLEMENTARY ADDED
VALUE TO STEEL USERS
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OPTIMIZE VALUE CHAIN CONTRIBUTION
▪ BUNDLE AND CUSTOMIZE VALUE CHAIN OFFER BY END USE SEGMENTS ▪ DIFFERENTIATE FROM MILL OFFERS ▪ ENHANCE ROLE OF STEEL DISTRIBUTION BY GREATER CUSTOMER PROXIMITY
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SOURCE: MCKINSEY, EUROMETAL
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EUROMETAL PRESENTATION PLATTS STEEL SUPPLY CHAIN CONFERENCE, ANTWERP 15 OCTOBER 2013
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BUSINESS MODELS OF EU STEEL DISTRIBUTION WILL FACE FOUR KEY CHALLENGES
SOURCE: McKinsey, EUROMETAL
CHALLENGES IMPLICATION EXPECTED DEVELOPMENT REQUIRED BY DISTRIBUTORS
PRICE VOLATILITY
▪ DUE TO SHIFT OF POWER IN RAW MATERIAL SUPPLY, LONG TERM CONTRACTS UNLIKELY TO BE REESTABLISHED
▪ WINDFALL PROFIT RISKS INCREASE, IMPORTANCE OF INVENTORY MANAGEMENT
▪ LONGER-TERM SUPPLY CONTRACTS BECOME DIFFICULT
▪ HEDGING NECESSARY?
▪ STOCK MANAGEMENT OPTIMISATION
PRICE INCREASE
▪ OVERALL PRICE INCREASE SUSTAINABLE DUE TO RAW MATERIAL PRICE AND COST INCREASE
▪ INCREASING RESISTANCE OF CUSTOMERS TO OFFSET PRICE INCREASE. DISTRIBUTORS CAN MOST LIKELY NOT PASS COST INCREASE TO END CUSTOMERS
▪ LEVERAGING PURCHASE POWER TO
▪ DIFFERENTIATE ▪ PRICING
SHIFTS IN VALUE CHAIN
▪ VALUE CREATION FOR STEEL DISTRIBUTORS LIKELY TO BE LIMITED BY STEEL COMPANIES' DOWNSTREAM INTEGRATION INTO STEEL DISTRIBUTION
▪ BUSINESS IS LIKELY TO BE CHALLENGED BY UPSTREAM STEEL PRODUCERS EXPANDING DOWNSTREAM TO REACH SCALE EFFECTS
▪ TAILOR MADE VALUE PROPOSITION TO CUSTOMERS?
OVER- CAPACITY
GAP OF OVERCAPACITY ESTIMATED AT 20-25 %
BATTLES FOR VOLUMES WITH NEGATIVE IMPACTS ON PRICING
CLOSURES, PRICING FOR VALUE
EbelHoferConsultants S t r a t e g y & M a n a g e me n t
MAIN ACTION FIELDS IN PRICING FOR VALUE
2013EN_Steel Net Forum 22
MAIN ACTION AREAS
1 Pricing of (extra) services
2 Training and value argumentation for sales
3 Tactics during price negotiations
4 Know your competitive position 5 Development of new services 6 Value based pricing 7 Optimization of price adjustments (volatile raw m.)
8 Discount and bonus system for customers
9 International pricing
10 Pricing of innovations / new products
11 Terms and conditions
12 List price setting
13 Incentive system for sales
Prof
it im
pact
med
ium
hi
gh
Need for action
medium 2.0
3.0
4.0
2.5 2.7 2.9 3.1 3.3 3.5 3.7 3.9high
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EVALUATION PRICING ASPECTS
Source: International Study ‘Steel Distribution 2013’- Pricing for value N=30
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8 12
11
10 13
7 6 5
4 3 2
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EUROMETAL’S INTERNATIONAL STUDY `STEEL DISTRIBUTION 2013`HAS IDENTIFIED THE FOLLOWING MAIN ACTION FIELDS IN PRICING:
Question 6/7: What is the need for action regarding the following aspects in your company? What is the profit impact of the following aspects in your company?
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EUROMETAL presentations include forward-looking information and statements about the steel sector (production, distribution, consuming industries and their stake-holders). Forward-looking statements are not historical facts but have to include financial or other projections & estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance.
For EUROMETAL the expectations reflected in such information and statements are
reasonable. Any third parties are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of EUROMETAL, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.
Consequently EUROMETAL • denies all responsibility regarding the said informations and statements • undertakes no obligation to publicly update forward-looking statements, whether as a
result of new information, future events, or otherwise.
DISCLAIMER