Do steel prices move together? : a cointegration test
Lack of international comparability in crude steel prices presents a problem in constructing an econometric model of the global steel market. The commonly used measures of crude steel prices are the weighted average of the prices of steel products and the index of the weighted average of prices based on a certain year. But in the context of constructing an econometric model of the global steel market, these measures are not comparable internationally. If the various product prices are cointegrated, it is appropriate to use the price of the most widely produced and traded product in the model (uncoated steel sheet) as an indicator of the general movement of crude steel prices. This paper concludes that the price of uncoated steel sheet cointegrates with the prices of other steel products in France and Germany. The same is not true of the United States, which may point to quality problems with the price data. Use of the price data of uncoated steel sheet as the indicator of crude steel prices in the global steel model would thus seem appropriate for capturing long-term price movements of various steel products. Using cointegration tests, this paper also investigates the relationship between macroeconomic variables and steel product prices.
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