| Characteristics
| Current situation
| Future trend
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| What are the most important resource markets used by this industry?
| Iron ore, coke (coal), electricity, scrap markets. It is important to notice that iron ore and coal are not “pure” resources of steel producers, since most of firms are vertically integrated and posses own mines. Partly it relates also to electricity.
| It is hardly possible that main resources markets will be changed over time, since there are no efficient substitutes. However it is probable that the importance of several resource markets will be changed. First of all it relates to the scrap market that probably will get more significance (especially if iron ore price increases). Second of all, it is linked to electricity market, prices on which will probably increase (if there will be the same economic growth).
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| Are these markets concentrated? Who has more market power at these markets: buyers or sellers?
| As for iron ore, coke and scrap markets they can’t be named concentrated. Actually iron ore and coke mines are in ownership of steel producers most frequently and even if not bargaining power of them is low (what relates also to scrap market).
As for electricity market, almost in all countries it is high concentrated market and electricity producers are extremely influencing players. Actually steel producers are highly dependent on price of electricity (some of them purchased or constructed own electricity stations).
| The situation will probably remain the same: the further process of backward vertical integration will take place. The role of electricity producers will be moreover increasing. As for scrap market its’ not really significant role will be changed, perhaps, only in long-run.
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| Do firms in the industry purchase relatively small volumes relative to other customers of supplier? To sales of typical supplier?
| In case of iron ore and scrap, steel producers are obviously main buyers[1]. In case of coke, they are essential buyer (in comparison with electricity producers, chemical companies, and so on) and comprise significant or sometimes the biggest part of suppliers’ sales. In case of electricity firms steel producers are only one among others.
| It is supposed that situation will remain the same, since the overall structure of sales in such mature industries as coal, steel or electricity will hardly change significantly.
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| Are there substitutes for these resources?
| There are no efficient substitutes for coal and electricity. Main substitute for iron ore is only scrap. Despite it is not widely-used scrap could be quite efficient substitute in the long-run. Simultaneously, the role of iron ore and coke producers is not much increased by the lack of substitutes, since most of steel producers have own mines. At the same time firms that don’t have own mines are actually very vulnerable.
| Perhaps with the change of technology instead of coal it would be possible to use another resource. However it seems not possible in the close future. The role of scrap as substitute of iron ore will be probably increasing.
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| Credible threat of forward integration
| There is no actual threat of forward integration from suppliers of coal, iron ore or electricity, since they are much weaker (in case of coal and iron ore producers) and do not posses necessary capabilities (especially in case of electricity companies, which are moreover highly regulated by government very often). On contrary there is an opportunity to backward integration by steel producers.
| It is hardly possible that there will be any threat of forward integration by suppliers. As it is already mentioned, in contrary it is possible to expect further backward integration by steel producers.
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| Are suppliers able to price discriminate?
| It may be probable in case of outside coke and iron ore suppliers (however there almost no steel producers without own ore or coal mines), but even this probability is low since there is a big number of producers all over the world.
Much probable seems the situation when electricity companies are going to price discriminate. Actually in indirect way it happens in several countries (especially in China, when electricity generated is not enough for the whole economy).
| In the future price discrimination can be high probable in case of electricity suppliers (especially in case of at least partial deregulation of the industry) almost in all countries. Price discrimination in case of coal, scrap or iron suppliers is hardly anticipated.
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