Integration of the markets for metal products

Abstract

The continuing significance of the metallurgical sector in the Russian economy is noted. The structural changes in the consumer market for metal goods are refined, in the light of the continuing demand from the power industry. It is important to take account of the geographic integration of markets in contemplating further industrialization. On the basis of a model proposed by Glushchenko for assessing the integration of the internal consumer market, the interregional integration of markets is analyzed for the example of several submarkets for metal products used in the oil and gas industry and in construction. Market integration is assessed in terms of compliance with the uniform-price law, which proposes a single price for a particular product over several geographically distinct market segments, with no barrier to trade between them. An autoregression model is used to assess the rate of price convergence between regions and also the convergence to the national average. This approach permits comparison of the regional markets for high-tech, high-quality, and regular metal products in terms of geographic integration. The results show relatively weak integration of the regions in all three submarkets. For each one, the structure of integrated relations is different. On the basis of the results, a map of geographic integration of the market for high-tech metal products used in the oil and gas industry is plotted, reflecting the price convergence in the regions in a time-series model. The geographic distance between the market segments has no great influence on the rate of price convergence. It is expedient to consider the geographic integration of the markets in order to assess the indeterminacy when developing a strategy for new industrialization in Russia. In expanding the domestic consumer market for high-tech metal products with high added value, the development of interregional communication tends to reduce competitive risks and creates positive multiplicative and synergetic effects.

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