SAN FRANCISCO (June 8, 10:35 a.m. EDT) — Boldly gunning to gain the largest slice of the plastics electronic-commerce pie, dot-com trader ChemConnect Inc. has merged with Web supply-chain provider Envera.
The deal could send shivers down the spines of a few plastics dot-com competitors. The new company calls itself the first in the plastics industry to offer full-scale trading, starting with finding suppliers and ending with adjusting inventory, shipping product and tracking orders.
“Nothing out there is as broad or as deep as the value we now offer,” said ChemConnect Chief Executive Officer John Robinson in a June 7 telephone interview. “Some organizations will offer part of what we do, but no one else provides end-to-end integration and efficiency. We think this will be the clear winner in the market.”
While Robinson termed the deal, completed June 6, as a “merger of equals,” the terms seem to favor independent trade exchange ChemConnect. The company's name and San Francisco headquarters have been retained, and Robinson is CEO of the merged companies.
Others would disagree with Robinson's market assessment. Distributor GE Polymerland has built a successful online site, albeit funded by one resin company, and offers other services beyond buying.
And plastics e-marketplace Omnexus – a consortium of resin producers, compounders, distributors and machinery providers – believes it has the industry experience and contract-buying platform to bid for a dominant position among dot-com traders, said David Jukes, Omnexus senior vice president of sales and marketing.
Yet, Jukes said that ChemConnect's aggressive move has made others take notice.
“It's become a very interesting game now,” said Jukes, based at Omnexus' U.S. headquarters in Atlanta. “The smartest thing ChemConnect could do was to get Envera onboard. But we think our domain experience will carry us through.”
ChemConnect, an independent trading exchange launched as a seller of spot chemicals and resin, now adds the ability to automate such functions as inventory management, order tracking and logistics inside customer and supplier walls.
Together, ChemConnect and Envera –- started by a consortium of chemical companies – are backed by more suppliers than any other industry dot-com, added Envera Chief Executive Officer Bob Mooney.
That in itself could make ChemConnect a huge trader in the plastic commodities market, where spot trading is critical, said Steve Kafka, e-commerce analyst with Cambridge, Mass.-based Forrester Research Inc. Whether the company will acquire the same respect in contract resin transactions, where Omnexus is attempting to stake its claim, remains to be seen, he said.
Yet, Robinson countered that more than half of ChemConnect's sales now come from contract buys, not from spot trades.
It also will take a lot of work for ChemConnect to become a leader in supply-chain management, where Elemica, another consortium, is attempting to make headway, Kafka said.
“What Envera brings to the table is enormous liquidity in commodity plastics and chemicals,” Kafka said. “It will be a huge boost in the arm for them. But supply-chain execution and integration is really a big bite to chew.”
Before the merger, ChemConnect was hampered by the inability to do nothing more after a transaction was made, Robinson said. That limitation in helping customers automate orders has caused many processors to hesitate to use the site, Robinson said.
Within the next several months, Envera's supply-chain technology will be integrated with ChemConnect's trading model, he said. The new site will offer the ability to connect a processor's computer system to the ChemConnect trading site, or to offer a Web-hosted option for companies unwilling to buy a sophisticated in-house system.
With the Envera/ChemConnect deal, the plastics and chemicals Web business begins to make more sense, Kafka said. His firm estimates that by the end of 2004, about $2.7 trillion will be traded online by business-to-business companies in all industries.
“By the end of 2002, I expect we'll know who some of the winners and losers are,” Kafka said. “But this merger is good news for chemical and plastics companies. It starts to clear out the confusion.”