Higher-priced coking coal is likely to 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, both in absolute terms and compared to other routes. This typically contributes to higher steel prices as raw material prices are undergone. It might also accelerate the hole transition in steelmaking as emerging green technologies, like hydrogen reduction, would are more competitive in comparison with established production methods sooner. The need 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, in order that they will need to assess the tariff of emerging technologies, including 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 for different qualities of iron ore products rely upon 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, resulting in higher coke rates within the blast furnace. Higher coking coal prices raise the cost penalty suffered by steelmakers, leading to high price penalties for low-grade iron ores. This might affect overall iron ore price dynamics in 2 other ways, with respect to the degree of total iron ore demand. In a single scenario, if total requirement for iron ore can be met solely with high-grade iron ores, chances are that benchmark iron ore prices will continue steady. However, price reductions for lower-grade ore would increase significantly, potentially pushing producers of the material from the market. Within an 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 market industry since the marginal suppliers.
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