iSteelAsia.com (iSteel), an online steel exchange, has signed memorandum of understandings with five strategic partners in an effort to try and attract business from someone other than major shareholder Van Shung Chong, a steel trading company. The 'deals' were announced earlier this week at a press conference complete with T-shirt clad cheerleaders and Olympian music.
The fanfare with which the announcement was made was not reflected in investor sentiment and iSteel's shares remain thinly traded at below HK$0.40. iSteel floated on Hong Kong's Growth Enterprise Market in April, raising a net HK$82 million via the sale of 100 million new shares at HK$1.08 each in a deal arranged by BNP Prime Peregrine. Originally, the company had been looking to raise as much as HK$496 million by selling 248 million shares at HK$1.50 to HK$2, but that was before tech investors tired of paying large sums for minority stakes in ideas.
So what are these deals and will they make a difference? Three of the partners, BNP Paribas, Dao Heng Bank and COSCO (HK) Shipping are hoping to provide trade finance and shipping services to companies transacting on the site. The other two, China National Cereals, Oils & Foodstuffs Import & Export Corp (COFCO) and Kawasho Corp, have become founding members of iSteel รป something that will enable them to acquire shares in iSteel from its major shareholders for just HK$0.054 provided they hit certain targets regarding the amount of business conducted via the site. COFCO is an end-user of steel, which it requires for packaging purposes, while Kawasho of Japan is a steel trader.
"Each of our new partners will play a special role in iSteelAsia.com's development as an end-to-end one-stop shop online market for the global steel exchange," says Drina Yue, director and COO of iSteel. "The scope of these partnerships shows the multi-track strategy we are pursuing is increasing our transaction traffic, geographical reach and value-added services."
Increased transaction traffic is certainly something that iSteel could do with if Webb-site.com is correct. The independent non-profit financial analysis site says: "By the end of March, only 11 transactions had been concluded on iSteelAsia, which compares with the 'more than a dozen trades' reportedly claimed by its chairman."
Between December 1999 when the iSteelAsia website went live and the company's 31 March financial year-end, Van Shung Chong was the vendor in 100% of iSteel's offline steel deals, which brought in commissions totalling HK$1.189 million, and HK$101,000 of the HK$1.382 million commissions paid by the vendors in online transactions. The company refused to disclose the proportion of these online deals that had Van Shung Chong as the buyer, citing legal and privacy reasons.
