Abstract:In recent years, the downstream shareholding of upstream impacts whole steel industry. The price of iron ore and the allocation of profits in supply chain have changed much more than general forecast. In this paper, the research uses turnkey model of outsourcing theory to analyze the impact of downstream shareholding to the steel industry supply chain. In the first part, the three-tier branched supply chain without shareholding gives equilibrium solution to the price of iron ore and the allocation of profits. The comparison between branched supply chain and non-branched supply chain leads to that the manufacturer which provides low level products loses some profit with the rise of iron ore price. In the second part, the three-tier branched supply chain with downstream shareholding also gives equilibrium solution to the price of iron ore and the allocation of profits. The comparison between supply chain with shareholding and supply chain without shareholding leads to that the low level manufacturer suffers more loss. In summary, downstream shareholding raises the whole profit of steel industry supply chain. However, the high level manufacturer and the supplier of iron ore gain all extra profit. The low level manufacturer suffers much more loss than before. To get rid of this trouble, the low level manufacturer needs some improvement in technology to transfer to high level manufacturer and makes some efforts to hold suppliers.