Research On Impact By Pricing Model On China’s Iron Ore Import

Iron and steel industry remains as an important local pillar of China’s economy.In recent years this industry has developed rapidly and it promotes the whole nationaleconomy as well as improves the demand for the iron ore. In2011the import ofiron ore to China was6.86million ton, which took up65.3percentage of the globalimport, making China a typical big import country. Meanwhile, although with thelargest number of import of iron ore, China is a small country from the internationalEconomics perspective. The price of iron ore went up sharply but China did not takeeffective measures against it so that many iron and steel enterprises had to suffer theincreasing cost and less profit. China can do nothing with the pricing model of ironore. In the global market of iron ore, the long-term agreement pricing model wassubstituted by the quarterly index pricing model in2010. Now the new model existstogether with the spot transaction pricing model in the iron ore market. It is testifiedthat the price of iron ore is connected with the pricing model closely so here it is quitesignificant for China’s iron industry to decrease or control the cost if the study iscarried out on the pricing model and its impact on China’s iron ore import.Research on the pricing model and its impact on import price of iron ore andmarket status has been done theoretically and empirically. The oligopoly pricingmode can be used to analyze the equivalent price of monopoly enterprises and theinfluence on China’s buyer status and pricing power of iron ore theoretically. As tothe empirical perspective,Granger Causality Test can be taken to explore theinteraction between the price and the import quantity of iron ore, thus to see whetherthe buyer status has changed for China. Another method, Dynamic Equation of Price,can demonstrate how the pricing power of China in the iron ore market goes. Theresult shows that the adjustment to the quarterly index pricing model is in favor forChina’s import of iron ore by enhancing the buyer status and improving the pricingpower. Such a conclusion can be reached that it is beneficial to improve the importsituation of iron ore and obtain more pricing power for China if some well-directed suggestions can be put forward combined with the current pricing model.