2000/05/27

Pioneer and Leader of the Industry
- Interview with Mr. Andrew Yao, Chairman and CEO of iSteelAsia.com

Time: 9 May 2000
Place: Hebei Hall, the Great Hall of the People
Interviewee: Mr. Andrew Yao, Chairman & CEO of iSteelAsia.com

Q: Since the launch of its Chinese version in February 2000, iSteelAsia.com has been the focus of the steel industry in China. iSteelAsia.com was listed on Hong Kong's GEM in April. Could you summarize the current operation situation of iSteelAsia.com as it is evolving?

A: iSteelAsia.com was founded by major international steel enterprises from Asia, South Africa, Europe and the States, with the aim of providing comprehensive online services for the steel industry in Asia and the world. iSteelAsia.com is a neutral, efficient, multilingual trading platform, allowing members to search online and quote, to find products and trading partners, as well as negotiate transaction details. That is to say, sellers can reach worldwide customers at our portal, thus reducing transaction cost and increasing efficiency; buyers can make timely choices and compare quotes from different sellers.

iSteelAsia.com was listed on 20 April on Hong Kong's GEM, against a background of stormy market conditions on Nasdaq. We did not withdraw. The market fell, but as part of an adjustment, it is good for the long-term development of the Internet economy. Moreover, we believe in our strength, so we like to see less bubble stocks in the Internet economy.

Backed by more than 20 global steel enterprises as founding members, iSteelAsia.com was successfully launched in December 1999. Since then, the portal has aggregated a total transaction value of US$ 37 million (exceeding RMB$ 300 million), with membership reaching 1500.

Q: After the signing of the Sino-US mutual trade agreement, the Chinese authorities concerned are speeding up the formulation of e-commerce related laws, especially the "e-commerce law", which is the concern of the Ministry of Information Industry. This indicates that the Chinese government values highly the development of e-commerce, and wants to create a favorable environment for it. However, Chinese enterprises, especially state owned large and medium enterprises, currently know very little about e-commerce, with even less contact with it. With the birth of iSteelAsia.com, what you will do to promote e-commerce in steel enterprises in China?

A: The 21st century will be the century of knowledge and the Internet economy. Playing a leading role in the development of the Internet economy, e-commerce will certainly grow really fast in this century. With its characteristics and advantages in bridging time and space, the Internet brings on board government bodies and enterprises, as well as other facilities needed in trade activities, thus enhancing trade opportunities, reducing trade costs, raising trade efficiency and strengthening market competitiveness of enterprises. e-commerce is a highly efficient market with low costs, and together with comprehensive e-payment, this represents the future development of product distribution. Whoever grasps the opportunity of e-commerce, which combines the flow of information, capital and product, will certainly be better positioned in the global economy in the new century.

For iSteelAsia.com, we would like first to build up our brand name in the steel industry in China. We grasp this opportunity of the Steel Conference 2000 to introduce our portal. We also set up training classes and workshops so as to promote our portal, and create the market. I am sure that e-commerce will gradually be widely adopted.

Q: iSteelAsia.com co-hosted the Steel Conference 2000 in China, as well as solely sponsored Beijing's 7th International Metallurgical Industry Exhibition. Does this indicate that iSteelAsia.com is fully mobilized in opening up the Chinese market? How is iSteelAsia.com entering China?

A: Representing 45% of the global steel market, Asia's steel trade exceeds US$300 billion annually. China is the largest steel trading country in Asia. We wish to make use of China's important position in the global steel market, as well as iSteelAsia.com's advantage in information provision, transaction cost saving and other value added services, to bring new opportunities to China's steel industry.

iSteelAsia.com has been fully launched in the China steel market. As the first fully operational online steel trading vertical portal, iSteelAsia.com is the first listed steel trading vertical portal globally, and the first listed B2B portal in Hong Kong. We will fully utilize our first mover advantage to promote the development of international steel trade in China, and enhance the leading position of China's steel industry in international e-trade. To enter the Chinese market, we plan to establish offices in Beijing, Shanghai and Guangzhou, hold exhibitions in various cities in China, and provide training for Chinese counterparts, to bring them into the e-commerce world. We will also cooperate with the Chinese steel industry to establish internal trade portals in China, to develop value added services and steel information exchange, as well as distribution supply chain management systems.

Q: There are all kinds of portals emerging in China nowadays, new portals every day so to speak. The fact is, the competition in e-commerce is fierce. There are comments on this Steel Conference 2000 like "steel e-commerce, some will live, some will die". How iSteelAsia.com will face the challenge of this enormous competition?

A: B2B is very hot now. But I think B2B is not for every industry. When an investor, a founder, would like to start a B2B, he should know the following:
1. How big is the market? For the steel market, Asia represents 45% of global trade, that is US$ 300 billion in sales annually, a very big market.
2. What is the structure of the market? In the steel market, the 10 largest producers account for 25% of total global production. Every day, there are about 100 thousand producers, 100 thousand users, together with 200,000 intermediaries negotiating. B2B e-commerce is better suited here. If we were going to start a diamond portal, which would be impossible, as South Africa's Debeers already takes 70% of the market share.
3. How many people are there in the market transaction area? As we know, in China, Hong Kong and Japan, from producers to users, steel products go through many different hands. Some of them are value added, some not, but all of them charge commissions. Therefore, too many intermediaries are not good for the steel industry, and we aim at establishing a portal, to provide customers with the steel products they need at the right time and place.
4. Is there an active market? Can B2B be actively functioning?

Our foundations are technology and service. We cooperate with Scient from the United States, to serve customers with advanced network technology. We also provide various value added services to facilitate transactions, like financing, shipping, insurance, surveying, as well as distribution. For example, our members can have insurance services from CHUBB and Houlder, surveying services from Inspectorate of Switzerland and SGS. Moreover, our SSL encoding technology will ensure all transactions conducted in a 100% safe environment.

Therefore, we have confidence in maintaining our lead over the competition.