Metals ite
Although a number of small steel manufacturing plants (called minimills) have opened in
the past 20 years, most of the world's steel is still produced in very large steel mills. In
these steel mills, it is economical to produce steel only in large batches. Because of the
high cost of reconfiguring machinery,
a steel mill set up to oreate one type of steel (for
example, rolled sheets) requires significant time and money to ehange over to produce
another type of steel (for example, bar steel). To minimize these changeover costs, steel
mills produce steel products in large batches to meet estimated demand rather than
actual orders. Because production quantities are designed to meet estimated demand
instead of actual demand, steel mills often have overproduction of some items.
Companies such as Bethlehem Steel, with annual revenues of more than billion
and 14,000 employees, solved this problem in the past by sending faxes to potential
buyers of their excess production. Buyers would respond with a bid on the product in
which interested, and Bethlehem would negotiate with them to determine
they were
price and delivery terms.
In 1998, of the first metal trading exchanges to begin doing busi-
Metasite was one
ness on the Web These exchanges offered manufacturers such as Bethlehem an emeienr
way to reach a larger arket for their exoess production. Hy mid-2000, there were more