Dennen takes equity stake in SteelSalvor; cites live auction business model as future of distribution for steel industry
Narberth, PA — June 15, 2006 — SteelSalvor, a Web-based, steel industry focused auction and marketing solutions site, and Dennen Steel Corp., a $100 million U.S. steel service center, today announced a strategic partnership to make the distribution channel of non-prime steel more profitable, facilitate easier access to metals supply and address industry consolidation issues.
As part of the agreement, Dennen Steel has taken an equity stake in SteelSalvor and will introduce the benefits of SteelSalvor's approach to steel mills that it has forged relationships with during its 55 years in business.
Dennen's investment validates the belief that SteelSalvor's model for metals distribution will increase the value of excess and secondary steel materials for steel mills and their customers. By using SteelSalvor as a distribution channel, steel mills can increase their selling prices and reduce their administrative costs while buyers or distributors of metals will benefit by gaining easier access to greater supply. SteelSalvor's unique auction format, combined with its proprietary database, can be further leveraged to simplify and facilitate agreements with mills.
"Excess and secondary steel is a huge, over $5 billion dollar market that is stymied in traditional and exclusive distribution methods that are becoming increasingly less effective," said Scott Shapiro, CEO of SteelSalvor. "We see our business model as being disruptive to the status quo but strategic to future success in this industry because it expands the potential universe of buyers and sellers and offers non-exclusive access to supply."
The domestic steel market is estimated to be approximately $65 billion dollars in revenue annually. Depending upon market conditions, excess and secondary steel may represent as much as 20 percent of the total revenue generated in steel. Some experts estimate that approximately $5 billion dollars conservatively — and as much as $13 billion dollars potentially — of excess and secondary material is sold annually. In the sizable non-prime steel market, trends such as market consolidation and shrinking North American steel consumption is affecting competitiveness. Mill consolidation is limiting access to supply and reducing buying power for many participants. Distributor consolidation is making it difficult for independent operators to compete effectively.
"The steel industry is at a critical juncture and we'll better serve our customers and suppliers long-term by partnering with SteelSalvor," said Peter Dennen, senior vice president, Dennen Steel Corp. "We believe the steel industry is undergoing a natural evolution and will adapt as other industries have. For example, the music industry evolved with the digitization of recordings and the distribution shift from record stores to online downloading of songs. The SteelSalvor business model is consistent with our customer-centric philosophy of recognizing market needs and offering services to meet those needs. We believe that SteelSalvor is the future of distribution of excess and secondary steel, and this partnership is the catalyst for change."