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

Higher-priced coking coal will probably modify the steel industry’s transition to greener production methods and also the value-based pricing of iron ore. Higher-priced coking coal enhances the tariff of producing steel via blast furnaces, in the absolute terms and in accordance with other routes. This typically results in higher steel prices as raw material costs are undergone. It might also accelerate the green transition in steelmaking as emerging green technologies, for example hydrogen reduction, would be competitive in contrast to established production methods sooner. The necessity to reline or rebuild blast furnaces roughly every ten to fifteen years at a price that varies between $100 million and $300 million presents steelmakers with clear decision points, so they really should measure the price of emerging technologies, including hydrogen-based direct reduced iron, and choose to switch their blast furnaces.

Increased coke prices would also impact the value-based pricing of iron ore. Prices many different qualities of iron ore products depend upon their iron content along with their chemical (mainly phosphorus, alumina, and silica content) and physical composition (lumps versus fines versus pellets). Lower-quality iron ores want more energy to reduce, leading to higher coke rates inside the blast furnace. Higher coking coal prices increase the cost penalty suffered by steelmakers, ultimately causing high price penalties for low-grade iron ores. This could affect overall iron ore price dynamics in two different ways, with regards to the a higher level total iron ore demand. In a single scenario, if total requirement for iron ore can be met solely with high-grade iron ores, it’s quite possible that benchmark iron ore prices will remain steady. However, price reductions in price for lower-grade ore would increase significantly, potentially pushing producers with 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 remain in the market industry since the marginal suppliers.

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