Can China build steel agency system?

At present, there are many steel traders in China who contribute great to the circulation of steel products and booming local market. But due to their huge number, steel traders have also brought disorder and excessive competition to the local market. Recently, some important people from the steel industry have suggested the establishment of the “steel agency system” in China. So that, there will be a few big steel agents; and rules similar to those in some developed countries will be brought for the traders. This system has two key elements: i) Steel products' sales price is only determined by the mills and steel agents are just the executants of the fixed prices. ii) Traders will act as agents and gain commissions instead of their current profits from price margin. Of course, these suggestions originally have good intentions. Yet, it is not easy to establish such a steel agency system in China for the time being. The main reasons are listed as follows: 1. Washing out most of the steel traders is extremely difficult No one knows on earth how many steel traders there are in China: the number is too big. According to rough statistical data, there are more than 500 steel traders only in Shanghai! Under the suggested steel agent system, only a small part of current traders will survive and most of them will be washed out. This means unprecedented fierce competition and serious employment problems due to the washing out. 2. Traders are reluctant to be agent for less profit In recent years, steel traders have experienced a happy period. China's development brought huge demand for steel products, and both mills and traders have benefited greatly from the local market. Traders still have the chance to earn large amount of money in bull market times. Therefore they have no intention to accept a fixed commission instead of their profits. 3. Traders' functions cannot be completely replaced by agent Many traders are actually helping their customers who are short of cash. In China, most mills require delivery on cash. This means, traders have to pay when they purchase steel from the mills. However, due to competition and customers' requirement, they collect the payments from their customers one or two months later. It is apparent that steel agents cannot provide such a function. Most of the middle and small scale enterprises in China would welcome the steel agents only if they had high amount of cash. However, almost all of such enterprises are, in fact, in need of cash. Furthermore, successful steel traders do not want to change the current situation. Any change means a potential risk for them. For their success, these traders have invested much to build their business relationship network so they can easily benefit from the current steel trade mode. Their negative attitude towards changes will make great influences on mills and even on governments. Therefore, it is very difficult to establish steel agent system in China right now.