Effect of market structure on international coal trade

This paper is concerned with the determinants of international steam-coal trade. Most work in projecting coal trade has been either qualitative (a consensus of experts) or, if quantitative, has been based on competitive spatial-equilibrium models. Unfortunately, the competitive model of trade does not appear to account for observed and anticipated trade flows. This is consistent with findings in the commodity trade literature that, although markets may behave in a rational economic fashion, market concentration among producers, traders, and consumers leads to trade patterns significantly different than those associated with competitive markets. The purpose of this paper is to explore the significance and effect on patterns of steam-coal trade of several deviations from the simple competitive model. In addition to perfect competition, we examine monopoly (South Africa) and duopoly (South Africa, Australia) with a competitive fringe (US, Canada, Poland, China and Columbia). Using a simple equilibrium model of coal trade, we examine these market structures and evaluate the extent to which they can explain existing and anticipated trade patterns.