Trafigura, co-founded by French billionaire Claude Dauphin, said it has been drawn in by India's primary metals market that is forecast to grow at up to 8 percent a year.
Small and medium businesses contribute to more than a third of the market, but most of them depend on traditional methods of procurement. Per-capita consumption of nearly all metals in India, Asia's third-largest economy, is far below world levels.
The online store, named Lykos, will sell consignments of 1 to 24 tonnes of aluminium, copper, lead, nickel, tin and zinc at index-linked prices, Trafigura said in a statement on Wednesday.
It will invest $200 million to $300 million in Lykos over the next one year, a spokeswoman told Reuters in an email.
"There is a strong demand for refined metals such as aluminium, copper and zinc in smaller lot sizes, but currently the market suffers from lack of automation, erratic supply, poor quality control, complex transportation logistics and opaque pricing," said Raoul Bajaj, chief executive of Trafigura India.
Customers will have to pay cash to buy from Lykos, the spokeswoman said. That could limit its reach given that most small manufacturers are used to buying on credit, said a small metals trader. He did not want to be named.
Still, Trafigura's online platform could eat into the market share of smaller smelters and physical traders by attracting buyers at lower premiums, said a source at an Indian zinc smelter.
Trafigura customers will have to take delivery from warehouses newly built near manufacturing centres in the states of Gujarat, Rajasthan and West Bengal. More warehouses are planned, it said.
Trafigura's move comes as storage of metals is in focus globally. The company and other metal merchants, Wall Street banks and the London Metal Exchange face more than two dozen class-action lawsuits alleging they artificially restricted supplies from warehouses and inflated aluminium and zinc prices. They have all denied the allegations.
More recently, Chinese authorities have launched an investigation into whether a private metals trading firm, Decheng Mining, and its related companies used fake warehouse receipts at Qingdao Port to obtain multiple loans secured against a single cargo of metal. Decheng has not commented on the probe.
Trafigura, incorporated in the Netherlands, has a vast portfolio of assets from African petrol stations, Texas docks to a Brazilian port and iron ore terminal, a private equity vehicle, vast offtake deals and almost 9,000 employees across 58 countries.