The Global Iron and Steel Industry: From a Bilateral Oligopoly to a Thwarted Monopsony

• Author: Sylvain Sourisseau
• Date: 01 June 2018
• Published date: 01 June 2018
• DOI: http://doi.org/10.1111/1467-8462.12264

The Global Iron and Steel Industry: From a Bilateral Oligopoly

to a Thwarted Monopsony

Sylvain Sourisseau*

Abstract

China’s growing urbanisation and the speed of

development of its manufacturing industry has

led to a shock in steel demand. This article

analyses the evolution of the market structure

and the related market power shift. From a

stable situation in which a few steelmakers

negotiated with a few mining f‌irms to set an

annual price, the market has evolved to a new

price-f‌ixing regime as a result of supply–

demand confrontation. A new composition of

stakeholders in the iron and steel sectors has

emerged, transitioning from an oligopoly to a

thwarted monopsony.

1. Introduction

While the digital economy and the green

economy are associated with growth in devel-

oped countries, the steel industry appears to

symoblise a glorious industrial past or a theatre

of trade union revolt. Nevertheless, on a global

scale, the steel industry remains a high stakes

sector, in particular, for developing countries.

Indeed, for emerging countries to take their

place in the global economy, transport infra-

structure, buildings and many manufactured

goods have to be produced to fulf‌il the needs

of the growing middle class and meet the

demands of increasing urbanisation. In this

context, the iron and steel industry occupies an

important place in the upstream supply of

sectors such as building infrastructure, aero-

nautics, transport and energy.

The variations in demand as sociated with

the technical and economic li mits of stocks

makes the steelmaking indu stry especially

sensitive to short run econom ic f‌luctuations

and regional disparities exist, pa rticularly as a

result of the greater or les ser involvement of

public authorities. For insta nce, the 2008

global f‌inancial crisis (GFC) hi t European

steelmakers hard because of th e collapse in

demand, while at the same time, due to

massive support from public a uthorities in

maintaining demand for construc tion and

transport infrastructur e, Chinese steelmakers

experienced less impact. Chi na began its

policy of massive public investmen t in the

economy several years prior to the GF C to

stimulate growth. In the early 20 00s, China’s

demand-side policy led to a consi derable

expansion of its iron and steel industry, whic h

created a demand shock in th e iron ore

market, affecting not only mi neral extractors

but all international steel makers.

* Universit

ed’Evry-Paris Saclay—Economics, 23 Boule-

vard Francois Mitterand, Evry 91025 France; ADEME—

French Environment and Energy Management Agency,

20 avenue du Gresille, 49004 Angers France; email

sylvain.sourisseau@gmail.com.

The Australian Economic Review, vol. 51, no. 2, pp. 232–43

°

C2018 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research

Published by John Wiley & Sons Australia, Ltd