A SPATIAL EQUILIBRIUM-ANALYSIS OF WORLD IRON-ORE TRADE

A spatial equilibrium model depicting world iron ore trade is presented. It employs a quadratic program to evaluate the market performance of the iron ore industry in 1984 and predicts trade flows and market clearing prices for year 2000 assuming perfect competition under expansionist and stagnant demand scenarios. Market imperfections are found to distort some 21% of allocations and delivered prices, but the welfare costs are borne by producers in rents forgone and transport costs absorbed. Under perfect competition all producing regions benefit, but predicted shifts in market demand benefit the market shares of Africa and South America at the expense of Australia.