LONDON - Fourteen of the world's largest mining and metals firms are creating a single procurement marketplace on the internet in a move which could cut the industry's $US200 billion-a-year supply bill.
The exchange, which is expected to start transactions by the end of the year, is the latest example of business-to-business (B2B) Net marketplaces springing up in many industries to improve efficiencies in complex supply chains.
The partnership brings together rival companies from Australia, the Americas, Europe and Africa, and includes heavyweights such as aluminium smelter Alcoa , Anglo American, Rio Tinto and Australia's Broken Hill Proprietary.
Backers will inject up to $100 million into the project, which they intend to prepare for an initial public offering in two years.
"This initiative will enhance the speed, efficiency and ultimately the cost competitiveness in the current mining and metals supply chain," said Leigh Clifford, chief executive of Rio Tinto.
One industry source involved in the project said cost savings from online procurement of supplies were expected to reach 5 to 7 per cent.
Last month, 14 leading oil and gas companies joined forces in a similar project designed to focus $US125 billion a year of procurement spending on a common website, and other exchanges have been launched for industries as diverse as retail and autos.
For mining companies, online ordering of everything from earth-moving equipment to chemicals should cut transaction costs, increase price transparency and let them operate with smaller inventories.
The founders of the mining exchange represent more than 60 per cent of the market capitalisation of the global mining and metals industry, and include the world's largest producers of aluminium, copper, gold, platinum and iron ore.
They are already powerful players in certain markets. Rio Tinto, for example, has bought one in 10 of every truck ever built outside the Soviet Union with a capacity of 150 tonnes or more.
The new website, which aims to be independent and neutral, will be open to all industry producers and suppliers, and other mining and metals companies are expected to participate.
"It's a win-win for our buyers, sellers and consumers," said Jacques Bougie, president and chief executive officer of Alcan.
In 1999, the industry's total procurement spending was about $200 billion.
A chief executive for the cyber market will be appointed shortly and the venture is to bring in a technology partner to help run the site.
Industry sources said there were no plans to expand the exchange into a forum for selling minerals and metals online, despite expectations that growing volumes of business will eventually migrate to the internet.
Mining companies look to buy on net
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