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Online metals trading platforms

Accenture's Götz Erhardt explains how automation and digitalization are key in the evolution of metals trading.
Götz Erhardt

Götz Erhardt
Managing Director – Natural Resources, Accenture
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How are online metals trading platforms changing the industry?
Metals trading (regardless of the specific products and grades) has evolved considerably in the past few years. What used to be done face-to-face and sealed with a handshake is now increasingly being done online. We are seeing the digitalization of metals trading, in part, because IT tools are improving. It’s getting easier, for example, to abstract information from large amounts of data and use it to make trading decisions. And, it is materials and metals services companies driving these developments in trading, rather than the producers of the product.

However, there are some bigger industry dynamics at play. First, no one can ignore the major overcapacity of metals around the world, and this surplus has resulted in massive cost pressures across the industry. Trading is one of the few areas remaining where there is potential to reduce costs and obtain the crucial supply and demand intermediation that can take a significant part of the excessive net working capital out of the metals industry value chain.

The second factor is not necessarily making the headlines, but is equally impactful. Metals companies are increasingly digitizing their administrative processes such as order management, warehousing and logistics, as well as their functional areas like finance, which is contributing to the advancements in online metals trading and services.

What is the impact of automation, and how does that connect to the digitalization of metals trading?
Accenture’s experience across various industries shows that digitizing and semi-automating administrative processes can drive efficiency effects of up to 50 percent. These same principles can be applied to the metals industry. For example, there may be numerous system discontinuities in the metals order management process that need to be dealt with manually. This is no longer necessary once a metals company has electronic interfaces to handle these processes.

There has been a surge of online metals trading platforms getting up and running. Do you expect that trend to continue?
No, I don’t expect all online trading platforms will succeed. There are probably 20+ platforms—not including the e-commerce solutions of the producers—vying to compete for the same customers. The metals and materials services companies need to scale quickly (which requires capital for technology and capabilities) and build superior, customer-intimate solutions (which requires a mindset shift and capabilities). Those that get this right stand to benefit from economies of scale, learning and a competitive advantage that will be hard to catch. As such, I anticipate we’ll see metals trading and services consolidation within the next few years.

Are there synergies between online metals trading and other business divisions?
Actually there are quite a few synergies. Online platforms provide direct access to critical information, such as which customers will order what amount of metals at a certain grade and when they will do so. And, moreover, they allow for real-time segmentation of customers according to their inquiry and ordering behavior. These online systems make customer demand more visible, so it is easier for metals companies to plan ahead. Another area where digitalization is making a big difference is the integration of metals manufacturing. Online channels potentially allow manufacturers to deliver just-in-time smaller batches of many different metals to an end customer through robust demand information and materials services networks.

What are you particularly passionate about at work? Outside of work?
At work, I am passionate about new business models enabled by digital technologies. The digital dynamics and disruptions that are coming from end-customer markets are so intriguing. As a consultant, I like thinking through the different scenarios that could emerge for manufacturing and industrial services; defining the respective market entry or ecosystem positioning strategies; and building agile pilots and new services.

Outside of work, I am an avid basketball player—such a great sport! Therefore, if I am not at work or spending time with my wife and three children, you will definitely find me on the court.