Higher-priced coking coal probably will affect the steel industry’s transition to greener production methods and also the value-based pricing of iron ore. Higher-priced coking coal raises the tariff of producing steel via blast furnaces, in both absolute terms and relative to other routes. This typically leads to higher steel prices as raw material cost is undergone. It could also accelerate the green transition in steelmaking as emerging green technologies, such as hydrogen reduction, would be a little more competitive weighed against established production methods sooner. The requirement to reline or rebuild blast furnaces roughly every ten to 15 years at a price that varies between $100 million and $300 million presents steelmakers with clear decision points, so they will likely need to appraise the expense of emerging technologies, for example hydrogen-based direct reduced iron, and select to exchange 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 on 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 lessen, ultimately causing higher coke rates from the blast furnace. Higher coking coal prices raise the cost penalty suffered by steelmakers, leading to higher price penalties for low-grade iron ores. This can affect overall iron ore price dynamics in two other ways, with respect to the amount of total iron ore demand. A single scenario, if total demand for iron ore may be met solely with high-grade iron ores, it’s quite possible that benchmark iron ore prices will stay steady. However, price discounts for lower-grade ore would increase significantly, potentially pushing producers of this material out of your market. In the alternative scenario, if low-grade ore is needed to meet overall demand, both benchmark iron ore prices and discounts could increase significantly, to ensure that low-grade producers would be in the marketplace because the marginal suppliers.
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