Some interesting feedback on Enron's entry into the steel market.   Hope you're enjoying your vacation.

Lisa
----- Forwarded by Lisa Yoho/NA/Enron on 06/21/2001 11:20 AM -----


	Thomas Sfikas/ENRON@enronXgate 06/21/2001 11:04 AM 	   To: Steel Distribution@Enron  cc: Jeffrey McMahon/ENRON@enronXgate, Raymond Bowen/ENRON@enronXgate  Subject: Steel Stradegies Conference - NYC 06/20/01	


Yesterday, during the Panel V discussion, "Why Have Steel Middlemen Gone From The Most Threatened To Best Positioned", we got some direct feedback on the perception of Enron in the marketplace. The participants were, Fred Lamesh CEO of Trademarked Inc., Michael Siegel, CEO of Olympic Steel, Bud Siegel, CEO of Russell Metals, and Wilfred von Bulow, CEO of Ferrostaal Inc.; the moderator was Peter Marcus, Managing Partners of World Steel Dynamics. Each participant gave a brief speech about their respective companies which was followed by a Q&A session. The first mention of Enron was during Michael Siegal's speech in which he mentioned that Olympic Steel had "sold material to Enron" and that "Enron has recognized that steel is a commodity and for many countries represents currency."  Michael was clearly proud of his transactions with Enron and agreed with our view of steel as a commodity.
The real feedback came during the Q&A. Peter Marcus posted the following question to the panelists. "What about Enron? With their plan of entering the market with a number of hubs across the country, stocking material, with large scale distribution on a "spot" basis. Will this business model work? Do they offer any real value or not?" 
Following are the respective responses as best I can reiterate from my notes ( please don't quote me on this):
Fred Lamesh, TradeArbed: "The concept is too new to make a judgment yet on credibility. Enron has certainly been successful in the past and should not be discounted. I question their ability to procure material at competitive enough levels to make this a profitable venture but there may be some value in their delivery of financial instruments."
Michael Siegal, Olympic Steel: "Enron certainly has the financial means to withstand a "break even" business to support their financial instruments. At this point, we view them as just another entity in the market and until we can evaluate their performance, it is difficult to determine value. I am concerned though that they will prop up under capitalized distributors and allow them to operate despite mismanagement. One interesting and unique concept that they are trying to bring to the industry though is the idea that a contract is a contract, with liquidated damages for non performance. That would certainly be change (sporadic laughter among the crowd)."
Bud Siegel, Russell Metals: "I addressed the Enron question last night during dinner and was told that I was abusive to the young lady from Enron (Tammy, I later understood that you had a less than cordial conversation with Bud the previous evening). I am calling Enron the "Hunts of the steel business" with their idea of buying up the market. The whole concept is like Swiss cheese. You can not put up depots, buy from steel mills, and expect to sell the same steel to distributors cheaper than the mills themselves. The logistical expenses alone guarantee failure. You can not be everything to everyone. Considering the current state of under financing in this industry, they will inevitably end up financing bankrupt people and take credit hits. Without immediate success, Enron has been known to exist markets quickly in the past, and I believe they will be gone within the year."(some sporadic applause)   
Wilfried von Bulow, Ferrostaal: "Right now they are just another additional player in the market. They will certainly have an impact but it would not be pragmatic to make a judgment yet on their ability to succeed. Let's watch it and see if there is any value to what they are trying to bring to the market."
It appears to me that the focus on Enron in the market right now continues to be more on the physical aspects of what we are doing and not enough emphasis or credibility is being given to the financial tools we are bringing. It is obviously very easy to poke holes in a concept of trading large volumes of physical steel on a "spot" basis through the set up of physical hubs around the country. In the end, the only way we will be successful will be by bringing liquidity to our index through financial instruments. We need to focus more on educating customers about our financial tools, developing our curve, and bringing players to the market.