A hedonic model of import steel prices: Is the EU market integrated?

Abstract

Operating as a single integrated market, the EU is a major world trading power. The defence against anti–competitive conducts and the policy for facilitating price convergence among EU Member States are two fundamental tasks for protecting the fair development of its economic environment, a target explicitly set in the founding treaty of the European Economic Community. Their importance is even more significant for steel industry, given its crucial role in modern economies and the great attention it recently attracted in the agenda of policy makers due to potential practices of dumping, both worldwide and in EU. This study provides a detailed analysis of EU flat–rolled steel import prices aimed to shed a light on these issues through a price model based on a hedonic approach. Given their flexibility, hedonic models are perfect candidates for detecting the main price determinants and assessing the contribution of different features. Model estimates allow to quantify the effects that different origins and destinations have on steel import prices, so to assess the exporting price policy of non–EU countries and the level of price convergence among EU Member States. Results confirm the presence of a small cluster of exporting countries with an aggressive price policy, and provide no evidence of progress toward price convergence in EU steel market. Representing an evaluation of the law of one price validity along with EU objectives achievement, this last conclusion suggests a partial realization of the European Market Integration.