Trade
A lesson in market contestability: calculating the cost of Chinese state intervention in iron ore price negotiations
April 23, 2015
Luke Hurst
East Asian Bureau of Economic Research
Abstract
This article analyses the motivation and impact of the 2009 intervention of the China Iron and Steel Association (CISA) in benchmark price negotiations. The impact of the transition from benchmark pricing to a spot market mechanism, which was a consequence of the CISA’s intervention, is examined using a constrained bilateral monopoly model to calculate the financial impact of switching pricing mechanisms on Australian exporters and Chinese importers.
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