Severstal to expand in Ryazan by teaming up with distributor

Russian mining and steelmaker Severstal said that it hopes to expand its steel sales in a city where it has had no or little presence before, with the help of an independent distributor.

Several has invited steel distributor and processor Brok-Invest-Servis to join its online sales platform to target customers in Ryazan, west Russia.

The steel company’s clients will be able to see inventories for disposal from Brok-Invest, order it online and collect from the distributor’s warehouse in Ryazan, a stockholder representative told S&P Global Platts.

Severstal does not have its own warehouse in Ryazan, though Brok-Invest has been present there for a long time and has developed high volume of trade, the latter said.

Brok-Invest’s Ryazan-based inventory made visible on Severstal’s online platform comprises products of various mills. However, this may change in the future, should the scheme proves commercial success.

“It should experience both peak and off-peak sales before drawing a conclusion regarding its efficiency. The format is likely to take shape by the summer,” said the representative.

Severstal has not yet attached any conditions to the scheme. For now, Brok-Invest will accumulate all proceeds from the sales, while sourcing steel from a number of producers, including Severstal.

Going forward, if using Severstal’s online services yields Brok-Invest new clients or boosts its sales, the steelmaker may request a certain commission on sales or insist on its products comprising a larger proportion of the trader’s turnover, a source close to the matter said.

Brok-Invest turns 29 years this year. It manages four warehouses in Moscow and six regional warehouses in Ryazan, St Petersburg, Yaroslavl, Nizhniy Novgorod, Rostov-on-Don and Krasnodar. Its annual steel turnover averages at 850,000 mt, Brok-Invest has said.

This marks the third official announcement of a major Russian steelmaker giving distributors access to their online stores.

Since July 2019, Severstal has been running a similar experiment with distributor Evraz Metall Inprom in Tula and Kirov. Around the same time, NLMK signed an agreement with stockists Metallservis and SPK allowing them to sell their stocks through NLMK’s e-shop in exchange of giving the steel company access to their 70 warehouses.

The companies have invested heavily in developing online stores and platforms and are now inviting distributors to use this infrastructure to market their stocks.

Market sources said there have also been several other informal partnerships.

Distributors have been accommodating so far, having no budgets for creating similar online infrastructure comparable with those of producers.

“It is becoming so difficult to compete with them that developing synergies instead is becoming almost necessary to continue to co-exist,” one trading source said.

— Ekaterina Bouckley