An iron and steel company in Lianyungang, Jiangsu province. E-commerce is expected to help steel firms avoid overcapacity and address low profitability concerns. [Photo/China Daily]

The China Steel and Iron Association and several industry partners joined hands to set up the Steel E-commerce Research Center on Monday, with an eye on upgrading and transforming the industry reeling from low profits.

The research center, initiated by the China Metallurgical Industry Planning and Research Institute, will conduct preliminary research for steel companies taking the e-commerce route and also provide suggestions to policymakers to help the industry develop in a healthy and regulated manner.

Li Xinchuang, head of the institute, said existing problems for the industry include vicious competition, inaccurate trading data and improper disclosure of customer information, all of which need to be solved and regulated urgently.

According to industry data, there are 178 steel e-commerce trading platforms at present in China, accounting for about 27.6 percent of the domestic online commodity trading platforms.

Last year, steel e-commerce platforms reported total trading volume of more than 60 million metric tons and transaction value of over 200 billion yuan ($32.34 billion), accounting for about 10 percent of the total steel traded in the country.

Wang Changhui, co-founder of Zhaogang.com, one of the leading steel e-commerce platforms in China, said his platform has about 40,000 monthly active users and they have created a huge database that can be used by other steel companies.

"The logistics cost of steel trading in China is much higher than in other countries," he said. "The platform will effectively cut logistics cost for steel traders by reducing intermediate links."

According to Wang, the platform had an average trading volume of about 3 million tons of steel every month. "We will provide reliable storage, processing, logistics and financing services for small steel traders, which will help them survive in the sluggish market," he said.

Nie Linhai, deputy director-general of the department of electronic commerce and information at the Ministry of Commerce, said China's e-commerce sector had embraced rapid growth in the past few years and it is time to consolidate the gains.

"E-commerce transactions have seen a 40 percent year-on-year growth from last year during the first quarter of this year. However, medium and small-scale steel companies still should do proper due diligence before they take the e-commerce route to avoid risks because innovation is easy to talk about but difficult to achieve," Nie said.

Gan Yong, vice-president of the Chinese Academy of Engineering, said taking the e-commerce route will help steel firms avoid the overcapacity situation and address low profitability concerns.