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The role of the world’s major steel markets in price spillover networks: an analysis based on complex network motifs

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Abstract

In recent years, the international steel market has shown increasingly strong cross-regional correlation. To better understand the price trends of various markets, it is necessary to identify their inherent price spillovers. This paper combines a generalized autoregressive conditional heteroskedasticity Baba–Engle–Kraft–Kroner (GARCH-BEKK) model and complex network motifs to explore the price fluctuations among international steel markets. The study selects steel markets in 12 countries and regions and uses daily data on import and export prices from January 2009 to September 2017 to analyze eight steel products. The results show that spillovers are associated with geographical location, market development, product type and status. Spillovers mostly occur between buyer’s markets; additionally, the Asian market, especially the East Asian market, is in most cases the recipient of spillover, whereas the European Union (EU) market is in most cases the sender of spillover effects. Developed markets have clear spillover effects on emerging markets, sheet steel products have clear spillover effects on profile steel products, and the prices of midstream and downstream products in the industrial chain are the most influenced. This paper examines international steel market relationships from the perspective of price transmission, and the results can help manage and prevent large-scale economic risks.

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Acknowledgements

This research is supported by grants from the National Natural Science Foundation of China (Grant No. 41701121 and No. 41871202), the Beijing Youth Talents Funds (2017000020124G190), the Fundamental Research Funds for the Central Universities (Grant No. 2-9-2017-041) and the Graduate teaching reform program of China University of Geosciences, Beijing (Grant No. YJG2019002). The authors would like to express their gratitude to Prof. Haizhong An, who provided valuable suggestions, Dr. Sui Guo, Dr. Sida Feng, Dr. Qian Liu, Dr. Qing Guan, Ms. Feng Li, Mr. Haowen Wan and AJE-American Journal Experts who provided professional suggestions about language usage, spelling, and grammar.

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Authors and Affiliations

  1. School of Economics and Management, China University of Geosciences, Beijing, 100083, China

    Yanxin Liu, Huajiao Li, Xueyong Liu & Yajie Qi

  2. Key Laboratory of Carrying Capacity Assessment for Resource and Environment, Ministry of Land and Resources, Beijing, 100083, China

    Yanxin Liu, Huajiao Li, Xueyong Liu & Yajie Qi

  3. School of Information Engineering, China University of Geosciences, Beijing, 100083, China

    Jianhe Guan

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  1. Yanxin Liu
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Liu, Y., Li, H., Guan, J. et al. The role of the world’s major steel markets in price spillover networks: an analysis based on complex network motifs. J Econ Interact Coord 14, 697–720 (2019). https://doi.org/10.1007/s11403-019-00261-6

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