Higher-priced coking coal may well modify the steel industry’s transition to greener production methods as well as the value-based pricing of iron ore. Higher-priced coking coal increases the cost of producing steel via blast furnaces, in the absolute terms and in accordance with other routes. This typically leads to higher steel prices as raw material costs are passed through. It would also accelerate the hole transition in steelmaking as emerging green technologies, such as hydrogen reduction, would be a little more competitive in contrast to established production methods sooner. The requirement to reline or rebuild blast furnaces roughly every ten to 15 years at a cost that varies between $100 million and $300 million presents steelmakers with clear decision points, so they will have to measure the price of emerging technologies, like hydrogen-based direct reduced iron, and choose to switch their blast furnaces.
Increased coke prices would also get a new value-based pricing of iron ore. Prices for various qualities of iron ore products rely upon their iron content and chemical (mainly phosphorus, alumina, and silica content) and physical composition (lumps versus fines versus pellets). Lower-quality iron ores require more energy to cut back, leading to higher coke rates inside the blast furnace. Higher coking coal prices increase the cost penalty suffered by steelmakers, resulting in higher price penalties for low-grade iron ores. This can affect overall iron ore price dynamics by 50 % various ways, based on the amount of total iron ore demand. In a single scenario, if total interest in iron ore can be met solely with high-grade iron ores, it’s quite possible that benchmark iron ore prices will stay steady. However, price reductions for lower-grade ore would increase significantly, potentially pushing producers of the material out of your market. In a alternative scenario, if low-grade ore is required to meet overall demand, both benchmark iron ore prices and discounts could increase significantly, so that low-grade producers would be in industry because the marginal suppliers.
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