Enron Mail

To:mark.frevert@enron.com, greg.whalley@enron.com
Subject:FW: Steel Stradegies Conference - NYC 06/20/01
Date:Thu, 21 Jun 2001 09:03:00 -0700 (PDT)

Thought you might be interested in this feedback from a recent conference.



-----Original Message-----
From: Kabel, Jeff
Sent: Thursday, June 21, 2001 1:36 PM
To: Thomas Sfikas/ENRON@enronXgate@ENRON; Steel Distribution
Cc: McMahon, Jeffrey; Bowen Jr., Raymond
Subject: RE: Steel Stradegies Conference - NYC 06/20/01

I am in complete agreement with the below (except I think the applause for
our demise was, unfortunately, rather more aggressive!!). This was my first
exposure to the non-European Steel players and found myself quite amazed at
the few number of "public" advocates that we had at the conference in
consideration of what we are offering. The one-on-one contact with the
attendees was completely the opposite. We talked with a broad and numerous
set of people who, coming to the booth as sceptics (they think that were are
in the market just to grab the physical business), left with cards in hand
and future risk management meetings in mind. Big buyers (eg GE, Emerson) and
consultants (eg Accenture, McK, etc) were particularly receptive and should
be courted as public advocates for what we are doing.


-----Original Message-----
From: Thomas Sfikas/ENRON@enronXgate@ENRON
Sent: 21 June 2001 17:05
To: Steel Distribution
Cc: McMahon, Jeffrey; Bowen Jr., Raymond
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.