Effects Of Higher-Priced Coke For The Steel And Iron Ore Sectors

Effects Of Higher-Priced Coke For The Steel And Iron Ore Sectors

Higher-priced coking coal probably will impact the steel industry’s transition to greener production methods and also the value-based pricing of iron ore. Higher-priced coking coal raises the cost of producing steel via blast furnaces, in both absolute terms and when compared with other routes. This typically results in higher steel prices as raw material price is passed through. It might also accelerate saving money transition in steelmaking as emerging green technologies, including hydrogen reduction, would be a little more competitive in contrast to established production methods sooner. The necessity to reline or rebuild blast furnaces roughly every ten to fifteen years at a cost that varies between $100 million and $300 million presents steelmakers with clear decision points, in order that they should evaluate the expense of emerging technologies, such as hydrogen-based direct reduced iron, and select to change their blast furnaces.

Increased coke prices would also impact the value-based pricing of iron ore. Prices for several qualities of iron ore products depend on their iron content as well as their 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, bringing about higher coke rates in the blast furnace. Higher coking coal prices improve the cost penalty incurred by steelmakers, bringing about higher price penalties for low-grade iron ores. This may affect overall iron ore price dynamics in 2 different methods, with respect to the a higher level total iron ore demand. In one scenario, if total requirement for iron ore may be met solely with high-grade iron ores, it’s likely that benchmark iron ore prices will continue to be steady. However, price reductions for lower-grade ore would increase significantly, potentially pushing producers of the material out of the market. In the alternative scenario, if low-grade ore is necessary to meet overall demand, both benchmark iron ore prices and discounts could increase significantly, so that low-grade producers would be in the marketplace as the marginal suppliers.

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Antonio Dickerson

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