2003/8/14

iSteelAsia Finds its Way Out From the Internet Bubble

After the Internet bomb, .com companies need to make a change to survive. iSteelAsia is one of the few survivors. With utmost courage, iSteelAsia has successfully migrated from web base trading company to even cross out “.com” in its name.

Drina Yue, CEO of iSteelAsia, agrees that there are many difficulties in developing electronic business in China. Not only Internet connection in remote areas in China is very limited, network stability is another challenge, making Internet procurement and discussion nearly impossible. In addition, other related services, such as banking and shipping facilities are not ready to support. Therefore, the role of “iSteelAsia.com” (former name of “iSteelAsia Holdings Limited”) has to be adjusted to adapt the environment.

Multiply Turnover and Turnaround
She pointed out that iSteelAsia started to change its business strategy to engage in steel distribution two years ago. Since then, annual turnover rose sharply from HK$180 million to HK$400 million and reached HK$810 million last year. It was also a turnaround for the company and proved the successful change of its business model.

China is a huge market. Last year, steel import volume reached 24.5 million tones with total value of US$12.4 billion (approx. HK$96.7 billion). The China Steel Association forecasts that national consumption will rise to 190 million tones to 200 million tones this year and will further increase to 270 million tones in 2005. Total consumption in 2010 would be 50% more than this year’s projection to 330 million tones. Based on the figures above, Drina thought that the future of steel distribution business might be undermined. With the launch of CEPA, iSteelAsia could set up wholly owned subsidiary in the PRC. Drina, with smile on her face, said, “CEPA brings us more business opportunities and speeds up our development. We can enjoy the directorship two years earlier than foreign companies.” Currently, iSteelAsia has seven sales offices in the PRC and may set up more in the future.

A Bright Prospect
Drina is confident about China’s future development. “There are continuously many large scale projects launch, for example, the Three Gorges Campaign and other large scale infrastructure projects, as well as the development of West China, 2008 Olympic Games and 2010 World Expo in Shanghai. All of them have great demand for steel.”

Drina has a number of plans in her mind. She will capitalize iSteelAsia’s competitive edges, i.e. distribution power and logistics arrangement, to expand business, to win customers’ trust and encourage small-scale private enterprises to outsource their procurement function to iSteelAsia, hence, creates a win-win situation. These enterprises can reduce number of purchasing personnel as well as enjoy greater discount from iSteelAsia’s volume purchase, meanwhile strengthens iSteelAsia’s business.

Many local companies have contracted their businesses under the current economic uncertainty, but iSteelAsia, employing over a hundred staff, will continue to recruit talents to satisfy the growing business. Regarding the skeptic of relying on single market, Drina refuted, “It is expected that the market would sustain growth in the next five years. More importantly, it is the worry of the company who has large market share and we, iSteelAsia, only share about 1%. Aren’t we worrying too much?”

Note – Life in China
China has opened the door for thirty years and created many business opportunities. However, most people in Hong Kong are not enthusiastic to open up that fertile soil. Drina and her family shared a different thought to move and resided there in early years. Who knows their problems?

Born in Hong Kong and educated in the US, Drina stepped on that strange land after graduation in 1993. She explained that she believed China’s economy would take off, so she decided to station in Beijing since 1993. Her kids also moved to Beijing in the year after and stayed for six years.

The Yue family did not enjoy luxurious life. They lived in hotel apartment for more than six months which at that time most of the restaurants closed after 8pm. Later, they moved into a residential apartment but still faced many problems. It took them weeks to get daily necessities fairly in place. An example was that they made the bed cloth as bath curtain. Comparing to the comfortable environment and amnesties today, life at that time is incredible.