Higher-priced coking coal is likely to affect the steel industry’s transition to greener production methods along with the value-based pricing of iron ore. Higher-priced coking coal raises the price of producing steel via blast furnaces, in both absolute terms and in accordance with other routes. This typically results in higher steel prices as raw material price is passed through. It could also accelerate saving money transition in steelmaking as emerging green technologies, for example hydrogen reduction, would be a little more competitive in contrast to established production methods sooner. The call 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 need to measure the cost of emerging technologies, for example hydrogen-based direct reduced iron, and choose to exchange 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 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 want more energy to reduce, leading to higher coke rates in the blast furnace. Higher coking coal prices boost the cost penalty suffered by steelmakers, resulting in higher price penalties for low-grade iron ores. This might affect overall iron ore price dynamics by 50 percent different ways, with regards to the degree of total iron ore demand. A single scenario, if total demand for iron ore may be met solely with high-grade iron ores, chances are that benchmark iron ore prices will stay steady. However, price reduced prices for lower-grade ore would increase significantly, potentially pushing producers with this material out of the market. In the alternative scenario, if low-grade ore can be meet overall demand, both benchmark iron ore prices and discounts could increase significantly, so that low-grade producers would be in the market industry because the marginal suppliers.
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