The metal news marketplace made its own headlines yesterday when Platts announced it was acquiring Steel Business Briefing, including its TSI unit. As an outsider to some extent, we can’t comment on the specifics including acquisition size, terms, etc., but from our perspective, the deal has significance for metal buying organizations as well as for the balance of the metal news/analysis/intelligence community. We also continue to believe that the primary way metals sourcing professionals typically obtain market pricing and market intelligence to facilitate their contract and supplier management efforts remains mired in “the old model, (which we discuss more below). And this acquisition will do little to help.
What Drives the Deal?
We can see several rationale behind Platts’ acquisition of Steel Business Briefing. The most important reason behind the deal has to relate to the growth of exchange- traded metals. With newer contracts for steel billet, hot rolled steel and soon to launch scrap futures, this deal should come as no surprise given Platts incumbent position in related areas. Platts already has a comprehensive price data service albeit without the depth of the ferrous metals offered by SBB. As part of the acquisition, Platts now picks up this data service. Tick off synergy number one — perhaps the most important single driver of the deal.
According to Platts’ press release, “The acquisition of the SBB Group supports Platts strategy of expanding its presence in dynamic global commodity markets and immediately boosts our capabilities and the value we can provide to customers. Furthermore, according to the release, two-thirds of Platts’ revenue comes from outside the US, and adding additional capability around steel, an increasingly global market only enhances Platts existing offering. We would also view the deal as synergistic to some of the other markets Platts covers such as energy markets, oil, gas etc.
The battle for which price service will underpin the steel market remains unclear but Platts has better positioned itself via this acquisition. It also marks a comeback for a firm that was on the chopping block not too long ago.
The Battle You Don’t See
Behind the scenes, this deal puts the pressure on firms such as AMM and CRU. CRU’s prices currently underpin the CME HRC contract. CRU has also historically served as the index used by firms to peg steel contracts with producers and distributors. But we’d argue none of the current price data services provides the level, breadth or depth of the prices needed by industrial metal buying organizations. After all, the majority of firms do not hedge their metal spend.
Rather, industrial buyers peg contracts to a range of data points not currently published by the traditional metal trade publication/analyst industry. For the incumbents mentioned above, the real threat of course involves the ongoing challenge to the existing business models for data and price points and in the case of industrial buyers, price points not tied to exchanges per se — most industrial buyers never touch the exchanges — but rather, actionable data and price points tied to how industrial buying organizations actually buy metals.
At the end of the day, this deal will likely serve as a small footnote in how the metals trade and pricing publication marketplace changed just after the turn of the millennium. We believe far bigger changes are afoot, and here at MetalMiner, we’re among the chief instigators. In consulting we used a phrase to refer to little companies that threatened existing businesses — “ankle biters. Some ankle biters actually succeed in taking down the big boys rather than just serving as a minor annoyance. Usually, the victim does not know it until it’s too late (think Home Depot market share in floor tile, as an example¦they had tiny single digit market share in the mid 90’s but no tile producer ignores them today).
We’ve adopted this phrase in the office here. “Ankle biters, as we like to call them (i.e., folks that tend to annoy the industry leaders, this publication included) that offer up alternative business models have begun to push the envelope. We believe they will continue to change the way industrial metal buying organizations “source their metal buying intelligence if you will.
To our surprise and delight, MetalMiner has become the largest online metals media trade publication in North America from its humble roots as a side-blogging effort less than four years ago (when we were simply trying to sell more consulting around metals cost reduction). In fact, some sources (Alexa) even suggest that our overall traffic rankings are now two, even three, times higher than incumbents such as AMM.
That was part one of our original business plan — build the traffic and influence. Part two is now about to take shape. In the coming year, you’ll see us begin to do for metals pricing and price points what we’ve done for how metals industry watchers and buying professionals inform their sourcing strategies by reading our coverage and insights.
Our plan is to target what sourcing professionals need — not what journalists and analysts who’ve never bought and sold metals in the industrial world somehow think they want.
–Lisa Reisman
