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Market Integration in the International Coal Industry: A Cointegration Approach

Linda Warell

Year: 2006
Volume: Volume 27
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No1-6
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Abstract:
The purpose of this paper is to test the hypothesis of the existence of a single economic market for the international coal industry, separated for coking and steam coal, and to investigate market integration over time. This has been conducted by applying cointegration and error-correction models on quarterly price series data in Europe and Japan over the time period 1980-2000. Both the coking and the steam coal markets show evidence of global market integration, as demonstrated by the stable long-run cointegrating relationship between the respective price series in different world regions. This supports the hypothesis of a globally integrated market. However, when analyzing market integration over time it is not possible to confirm cointegration in the 1990s for steam coal. Thus, compared to the coking coal market, the steam coal market looks somewhat less global in scope.



Modeling and Analysis of the International Steam Coal Trade

Clemens Haftendorn and Franziska Holz

Year: 2010
Volume: Volume 31
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No4-10
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Abstract:
Coal continues to play an important role in the global energy sector and with the increase in international trade a global market for steam coal has de�veloped. We investigate market structure and recent price developments with a numerical modeling approach and develop two partial equilibrium models, a quantity based model and a model additionally incorporating energy values. We compare two possible market structure scenarios for the years 2005 and 2006: perfect competition and Cournot competition. Our chief finding is that, for both models, the simulation of perfect competition better fits the observed real market flows and prices. However, we also note that spatial price discrimination and a time lag in the pricing-in of capacity constraints are additional mechanisms in the market. From a modeling perspective, relying only on coal quantities leads to distortions in estimated trade flows, suggesting that an energy-based model is superior.





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