The Research On China's Loss Of Pricing Power In Importing Iron Ore

Price is one of the key issues in economic operation, which determine the distribution of interests in the market. But little is talked about the"pricing power"in the economics books. The 2003-2004"soybean storm"and"soaring iron ore price"in 2005 made economists begin to pay close attention to the"pricing power"in the international trade.Iron and steel industry is a pillar industry in the national economy, and now China's output of crude steel is the largest in the world. China's crude steel output in 2005 reached 349 million tons, which accounted for the 30.9 percent of the total output of the world. Because China's iron ore resources are mainly made up of lean ore, China imports a lot of iron ore these years. Now China is the biggest importing country of world on iron ore, which accounts for 43 percent of the iron ore trade in the world, but China has little control over the pricing power of the iron ore now. It is not good for the development of China's Iron and steel industry, or even for the function of China's economy. The subject of this dissertation is about China's importing pricing power of the iron ore.This paper falls into six chapters.The foreword, namely, the first chapter introduces the background, theme, signification, basic disciplines, analytical approaches, main idea and structure of this paper. The foreword is to give an elementary impression of the paper. Chapter 2, as a leading part, firstly describes the phenomena of the importing iron ore. Secondly, it gives the definition of the pricing power on the foundation of the former research. At the end of the part, it summarizes former literature on the"factors on the pricing power"and"the effect and measures on the loss of pricing power".Chapter 3 analyzes China's pricing power on the importing iron ore in an empirical way. From the contrast of China's importing price against the world's prevailing price and other guidelines, it comes to the conclusion that China hasn't the pricing power of the importing iron ore since 2003.Chapter 4 makes an elementary discussion on the reason why China's loses the pricing power. At first, it reviews the situation of the iron ore supply. Then, it analyses the reasons why China needs so much iron ore. At last, it tries to find some clues from the structure and problems in the development of Chinese Iron and steel industry.Chapter 5 approaches the loss of pricing power from another point of view, namely, the special trading rule of the iron ore. Firstly, it introduces the two main prevailing trading rules of the iron ore. Secondly, it tries to find out if the supply alliance is steady. If it isn't steady, then China will easily get the pricing power in the future. According to the reputation model, it is found out that the supply alliance is relatively steady. At the end of the chapter, it discusses the 2007 iron ore price negotiations concluded recently. Given the process and the results of the negotiation, China still hasn't the pricing power.Chapter 6 aims to resolve the problem. Before giving the suggestions on how to get the pricing power, it analyzes the effects caused by the loss of pricing power. In the end, it gives suggestions on how to get the pricing power from the following three aspects: first, guarantee the supply of iron ore; second, effectively control the demand; third, take full advantage of the unique nature of the trading rule. Innovation and Main contribution of this paper are:Design an indicator to judge whether or not the importing iron ore is lack of pricing power.Use Game Theory to prove oligopoly suppliers of iron ore are a relatively stable coalition.Analyze the 2006-2007 annual iron ore price negotiations. Even though the based price was negotiated by China, it does not mean that China has got the pricing power.Discuss the feasibility of getting the pricing power from the perspective of trading rules, and give some specific measures on it.