The Research On The Integration Of Industrial Chain Of China’s Steel Industry

In recent years, China’s steel industry is facing increasingly tough trading situation, mainly for the following two aspects:the continuing rising import prices of raw materials--iron ore, which makes the domestic steel companies have to pay more cost of several hundred billion dollars annually; the deteriorating environment of China’s iron and steel products in the international market. To fundamentally resolve this issue for the steel industry, I think a fast in-depth and comprehensive integration of the whole industry chain must be going.Based on the above understanding, with the use of the industrial chain integration theory and game models, the paper analyses the integration on the industrial chain of China’s steel industry respectively from the horizontal and vertical.The paper uses bargaining game model to analyze different game equilibrium with different cost in horizontal integration. With the horizontal integration price-fixing cartel, the paper makes a little improvement with the previous assumptions of Bertrand game model, which is that enterprises involved in the game is set into a different scale and fixed costs. With these assumptions I calculate out a certain market share boundaries, which q*is, for the different stages of the price-fixing cartel game. Then according to the order of the industrial chain I analyze vertical integration issues. As for the vertical integration of iron and steel enterprises and traders, the analysis model can refer to Chapter IV of bargaining model, I will focus on the issue of vertical restraints; because the vertical restraints is to solute how attract participants to take active steps to maintain a cooperative situation, I choose the incentive mechanism to design model and transfer payment mechanism. Based on these I deduce the range of transfer payment.Finally, after the previous model analysis and simulation data, this paper considers in a certain time China will still require large-scale imports of iron ore and steel products still need to rely on exports to solve the problem of excess, while the domestic steel companies and parties involved in must as soon as possible to achieve effective integration in order to alleviate the passive situation in the international market.