Alibaba's Investment Arm Will Enter The Steel Trading Business

• An investment arm of Alibaba Group Holding Ltd BABA inked a new partnership with a major state-backed metals trader to jointly invest in an eCommerce platform for steel products.
• Alibaba's Hangzhou Ali Venture Capital will invest 317 million yuan (approximately $49.5 million) in the eCommerce 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 eCommerce 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 on investing 317 million yuan (approximately $49.5 million) in an eCommerce site that sells steel products. Caixin noted that Alibaba's investment arm will partner with Minmetals Development Co., a unit of China Minmetals Corp who will also invest 203 million yuan. Alibaba and the state-back 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. 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 that the partnership with Alibaba represents a prime example of a state-owned company partnering with the private sector to improve profitability and efficiency.