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Structural Change in Mass-Procurement Systems: China’s Iron and Steel Industry and the Global Iron Ore Market

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  • Akira Tanaka
  • Xiaochun Huang

Abstract

This paper was originally presented at the 1stWorld Congress on Business History/ This study aims to describe historical trends in the “mass-procurement system” for iron ore, which for many years has been the largest non-fuel natural resource in terms of trade value. Wefocus on China because it reflects globaltrendsmost comprehensively. Throughmodern history, all large steel producers have established their own iron ore mass-procurement systems. We can classify thesesystemsinto three major modes:“captive mine”,“long-term contract (LTC)”,and “spot trading.” We found that in China, traditional state-owned steel companies such as Anshan Iron and Steel (Ansteel)adopted the captive-mine mode from the prewar period, like the Americans. On the other hand, the newly established leadingcompany Baoshan Iron and Steel (Baosteel) introduced the LTC mode, following the innovationof this mode by Japanese companies in the 1980s. Then, in the early twenty-first century, China’smass-procurement system for iron ore further diversifiedwhich establishedthe spot-trading mode as the third mass-procurement system. As a result, many steel companies tended to create a portfolio of sourcing modes.

Suggested Citation

  • Akira Tanaka & Xiaochun Huang, 2017. "Structural Change in Mass-Procurement Systems: China’s Iron and Steel Industry and the Global Iron Ore Market," Discussion papers e-17-005, Graduate School of Economics , Kyoto University.
    • Handle: RePEc:kue:epaper:e-17-005
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    References listed on IDEAS

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    1. Sukagawa, Paul, 2010. "Is iron ore priced as a commodity? Past and current practice," Resources Policy, Elsevier, vol. 35(1), pages 54-63, March.
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    3. Stephen Labson, B., 1997. "Changing patterns of trade in the world iron ore and steel market: An econometric analysis," Journal of Policy Modeling, Elsevier, vol. 19(3), pages 237-251, June.
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    More about this item

    Keywords

    Iron ore; China; Steel industry; Outsourcing;
    All these keywords.

    JEL classification:

    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • N55 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Asia including Middle East
    • N65 - Economic History - - Manufacturing and Construction - - - Asia including Middle East
    • N85 - Economic History - - Micro-Business History - - - Asia including Middle East
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade

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