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Market Structure Scenarios in International Steam Coal Trade

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  • Trueby, Johannes

    (Energiewirtschaftliches Institut an der Universitaet zu Koeln)

  • Paulus, Moritz

    (Energiewirtschaftliches Institut an der Universitaet zu Koeln)

Abstract

The seaborne steam coal market changed in recent years. Trade volumes grew dynamically, important players emerged and since 2007 prices increased significantly and remained relatively high since then. In this paper we analyse market equilibria in the years 2006 and 2008 by testing for two possible market structure scenarios in this market: perfect competition and an oligopoly setup with major exporters competing in quantities. We conclude from our results that international steam coal trade is not perfectly competitive as there is a large spread between marginal costs and prices and a low capacity utilisation in 2008. Further, trade flows are generally more diversified in reality than in the competitive scenario. However, also the Cournot scenarios fail to accurately explain real market outcomes. We conclude that only more sophisticated models of strategic behaviour can predict market equilibria in international steam coal trade.

Suggested Citation

  • Trueby, Johannes & Paulus, Moritz, 2011. "Market Structure Scenarios in International Steam Coal Trade," EWI Working Papers 2011-2, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    • Handle: RePEc:ris:ewikln:2011_002
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    More about this item

    Keywords

    Steam coal trade; Mining Costs; Market Structure;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices

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