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Market Structure Scenarios in International Steam Coal Trade

The seaborne steam coal market has changed in recent years; demand has grown fast, important players have emerged, and since 2007 prices have increased significantly and remained relatively high. In this paper, we analyze steam coal market equilibria in the years 2006 and 2008 by testing for two possible market structure scenarios: perfect competition and an oligopoly setup with major exporters competing in quantities. The assumed oligopoly scenario cannot explain market equilibria for any year. While we find that the competitive model simulates market equilibria well in 2006, the competitive model is yet not able to reproduce real market outcomes in 2008. The analysis shows that not all available supply capacity was utilized in 2008. We conclude that either unknown capacity bottlenecks or more sophisticated non-competitive strategies were the cause for the high prices in 2008. Keywords: Steam coal trade, Mining costs, Market structure

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Energy Specializations: Coal – Markets and Prices; Coal – Policy and Regulation; Electricity – Generation Technologies

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
Q53 - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
Q2 -

Keywords: Steam coal trade, Mining costs, Market structure

DOI: 10.5547/01956574.33.3.4

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Published in Volume 33, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.