Time-varying international market power for the Chinese iron ore markets

This study analyses the dynamics of iron ore's international market power on exports to China by Australia, Brazil, India and South Africa. It uses the residual demand elasticity (RDE) model and rolling window regression model and applies the monthly data for the international iron ore market over the period from January 2006 to December 2016. The results indicate that (1) Australia and Brazil exercise market power in the Chinese iron ore market, but India and South Africa have no market power in the iron ore market; (2) market power has a time-varying nature, particularly in Australia and Brazil; and (3) changes in the pricing regime in the international iron ore market have a profound impact on market power. Furthermore, to maintain the stability of the Chinese iron ore market, exporters are suggested to enhance their competitiveness and gain greater market power on the basis of maintaining market share, and China should optimize its trade structure.