Structural Change in Mass-Procurement Systems: China’s Iron and Steel Industry and the Global Iron Ore Market

Akira Tanaka and Xiaochun Huang

Discussion papers from Graduate School of Economics , Kyoto University

Abstract: This paper was originally presented at the 1stWorld Congress on Business History/ This study aims to describe historical trends in the “mass-procurement system” for iron ore, which for many years has been the largest non-fuel natural resource in terms of trade value. Wefocus on China because it reflects globaltrendsmost comprehensively. Throughmodern history, all large steel producers have established their own iron ore mass-procurement systems. We can classify thesesystemsinto three major modes:“captive mine”,“long-term contract (LTC)”,and “spot trading.” We found that in China, traditional state-owned steel companies such as Anshan Iron and Steel (Ansteel)adopted the captive-mine mode from the prewar period, like the Americans. On the other hand, the newly established leadingcompany Baoshan Iron and Steel (Baosteel) introduced the LTC mode, following the innovationof this mode by Japanese companies in the 1980s. Then, in the early twenty-first century, China’smass-procurement system for iron ore further diversifiedwhich establishedthe spot-trading mode as the third mass-procurement system. As a result, many steel companies tended to create a portfolio of sourcing modes.

Keywords: Iron ore; China; Steel industry; Outsourcing (search for similar items in EconPapers)
JEL-codes: F50 N55 N65 N85 Q37 (search for similar items in EconPapers)
Date: 2017-08
New Economics Papers: this item is included in nep-cna, nep-his and nep-tra
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