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

Higher-priced coking coal probably will impact the steel industry’s transition to greener production methods plus the value-based pricing of iron ore. Higher-priced coking coal boosts the expense of producing steel via blast furnaces, both in absolute terms and relative to other routes. This typically brings about higher steel prices as raw material prices are undergone. It might also accelerate the green transition in steelmaking as emerging green technologies, like hydrogen reduction, would become more competitive compared with 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 have to evaluate the tariff of emerging technologies, including hydrogen-based direct reduced iron, and choose to exchange their blast furnaces.

Increased coke prices would also affect the value-based pricing of iron ore. Prices for various qualities of iron ore products rely upon 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 scale back, ultimately causing higher coke rates within the blast furnace. Higher coking coal prices increase the cost penalty incurred by steelmakers, bringing about higher price penalties for low-grade iron ores. This can affect overall iron ore price dynamics by 50 % various ways, depending on the a higher level total iron ore demand. In a scenario, if total requirement for iron ore might be met solely with high-grade iron ores, it’s likely that benchmark iron ore prices will continue to be steady. However, price reduced prices for lower-grade ore would increase significantly, potentially pushing producers of this material out from the market. In an alternative scenario, if low-grade ore is necessary to meet overall demand, both benchmark iron ore prices and discounts could increase significantly, to ensure that low-grade producers would stay in the market industry as the marginal suppliers.

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