Market Overview

Alibaba Investment Arm Will Enter The Steel Trading Business

Alibaba Investment Arm Will Enter The Steel Trading Business

  • An investment arm of Alibaba Group Holding Ltd (NYSE: BABA) inked a new partnership with a major state-backed metals trader to jointly invest in an e-commerce platform for steel products.
  • Alibaba's Hangzhou Ali Venture Capital will invest 317 million yuan (approximately $49.5 million USD) in the e-commerce business, while Minmetals Development Co. will invest another 203 million yuan.
  • Alibaba has been eyeing an entry into vertical markets, and the plunge in steel prices has created an opportunity for online trading of the commodity.
  • Alibaba is best known for its e-commerce platforms, which is why its entry into the commodities market may be puzzling.

    According to Caixin, a China-based media publication, Hangzhou Ali Venture Capital, an investment arm of Alibaba, plans to invest 317 million yuan (approximately $49.5 million USD) in an e-commerce site that sells steel products.

    Caixin noted Alibaba's investment arm will partner with Minmetals Development Co., a unit of China Minmetals Corp; Minmetals will also invest 203 million yuan. Alibaba and the state-backed metals trading company will put the money in an already existing company called Minmetals E-Commerce Co that has been operating since 2012, but suffered losses in recent years.

    Related Link: Report: Alibaba Is Not Interested In Yahoo's Core Internet Business

    Expanding Vertically

    Alibaba's president of business-to-business unit, Wu Minzhi, said that the company has been eyeing an entry into a vertical market – selling multiple products that are focused on one particular industry. The company may be attracted to the recent plunge in steel products that have since "created an opportunity for online trading to improve the efficiency and cut costs," Caixin added.

    The chairman of China Minmetals, He Wenbo, said the partnership with Alibaba represents a prime example of a state-owned company partnering with the private sector to improve profitability and efficiency.


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