Mining Firms Continue B2B Trend

Following examples set by the computer, steel, automotive and airline industries, 14 of the world’s largest mining companies say they will form an online business-to-business (B2B) exchange to cut procurement costs.

The companies say they are prepared to invest up to $100 million (US$) in the B2B venture, anticipating that it will dramatically reduce the $200 billion they spend each year on supplies and services.

The companies say they will name a CEO shortly and the site will be operating by the end of the year. The exchange will be run independently, but there could be an initial public offering of stock within two years, the companies said.

Biggest Names in Mining

Leading members of the group include Alcoa, Inc., De Beers Consolidated Mines Ltd., Alcan, Barrick Gold Corp., Inco Ltd. and Noranda.

The exchange is comprised of companies from North America, Europe and Africa, who together comprise more than 60 percent of the worldwide metals industry.

“This is about the metals industry getting closer to its suppliers,” said Alcoa president Alain J.P. Belda. Two weeks ago, Alcoa was one of eight metals firms to establish a wholesale Web site for metals and precious metals that will link mining and refining companies to their customers.

Rush to the Web

The latest venture is aimed at making it easier and less expensive for mining companies to buy everything from massive drilling rigs to dynamite. The companies say individual firms using the site will be allowed to transact business while maintaining confidentiality.

In recent months, major players in a host of industries have announced that they would partner to form money-saving Internet exchanges for the raw materials they use to do business. In March, a group of healthcare giants said they would form a privately held exchange to streamline purchasing for healthcare providers.

Major airlines, automakers and steel producers have established B2B exchanges as well.

In early May, some of the world’s largest computer makers, including Hewlett-Packard, Compaq Computer and Gateway, Inc. announced the formation of a stand-alone B2B computer venture. The same day, IBM said it would partner with 10 other companies on a B2B Web site of its own.

B2B Boom

The arrival of industrial giants on the Web should help fulfill predictions for the size of the B2B marketplace. The Boston Consulting Group predicted that U.S. B2B sales will grow by 33 percent each year and reach $2.8 trillion by 2003. Forrester Research made a slightly more conservative estimate of $2.7 trillion by 2004.