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Steel scrap and equity market in Japan

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  • Omura, Akihiro
  • Todorova, Neda
  • Li, Bin
  • Chung, Richard

Abstract

Steel scrap is an important raw material in the steel making industry. As steel is a vital metal in modern life, the price of steel scrap is viewed as an important indicator of the macroeconomic activity. Steel scrap is consumed mainly in the electric arc furnace steel making, which represents approximately 30 per cent of the world annual steel production. Unlike other minerals including iron ore, both the supply and consumption amounts of steel scrap can be relatively easily adjusted based on the contemporary industrial activity level. For this reason, the steel scrap price reflects the condition of the macro economy and thereby it can be used as an indicator of future stock market performance in the country by market participants. Nevertheless, there is not much research on the market of steel scrap. This study aims to close this gap by testing the lead–lag relationship between the changes of steel scrap price and the aggregate Japanese stock market movement. Our empirical analyses suggest that the steel scrap price changes are informative in explaining the future stock market performance in Japan.

Suggested Citation

  • Omura, Akihiro & Todorova, Neda & Li, Bin & Chung, Richard, 2016. "Steel scrap and equity market in Japan," Resources Policy, Elsevier, vol. 47(C), pages 115-124.
    • Handle: RePEc:eee:jrpoli:v:47:y:2016:i:c:p:115-124
    DOI: 10.1016/j.resourpol.2016.01.001
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    Cited by:

    1. Liu, Yanxin & Li, Huajiao & Guan, Jianhe & Liu, Xueyong & Guan, Qing & Sun, Qingru, 2019. "Influence of different factors on prices of upstream, middle and downstream products in China's whole steel industry chain: Based on Adaptive Neural Fuzzy Inference System," Resources Policy, Elsevier, vol. 60(C), pages 134-142.
    2. Ma, Yiqun, 2021. "Do iron ore, scrap steel, carbon emission allowance, and seaborne transportation prices drive steel price fluctuations?," Resources Policy, Elsevier, vol. 72(C).
    3. Ma, Yiqun & Wang, Junhao, 2021. "Time-varying spillovers and dependencies between iron ore, scrap steel, carbon emission, seaborne transportation, and China's steel stock prices," Resources Policy, Elsevier, vol. 74(C).
    4. Ma, Yiqun & Wang, Junhao, 2019. "Co-movement between oil, gas, coal, and iron ore prices, the Australian dollar, and the Chinese RMB exchange rates: A copula approach," Resources Policy, Elsevier, vol. 63(C), pages 1-1.
    5. Qi, Yajie & Li, Huajiao & Liu, Yanxin & Feng, Sida & Li, Yang & Guo, Sui, 2020. "Granger causality transmission mechanism of steel product prices under multiple scales—The industrial chain perspective," Resources Policy, Elsevier, vol. 67(C).
    6. Ma, Yiqun, 2021. "Dynamic spillovers and dependencies between iron ore prices, industry bond yields, and steel prices," Resources Policy, Elsevier, vol. 74(C).
    7. Gutierrez, Juan P. & Vianna, Andre C., 2020. "Price effects of steel commodities on worldwide stock market returns," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).

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    More about this item

    Keywords

    Equity markets; Commodity markets; Metal markets; Steel scrap; Forecasting; Japan;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices

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