Higher-priced coking coal is likely to get a new 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 the absolute terms and compared to other routes. This typically results in higher steel prices as raw material price is undergone. It will also accelerate the green transition in steelmaking as emerging green technologies, like hydrogen reduction, would are more competitive compared with established production methods sooner. The need 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 that they will need to assess the price of emerging technologies, such as hydrogen-based direct reduced iron, and judge to exchange their blast furnaces.
Increased coke prices would also modify the value-based pricing of iron ore. Prices many different qualities of iron ore products rely upon their iron content in addition to their 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, bringing about higher coke rates in the blast furnace. Higher coking coal prices improve the cost penalty incurred by steelmakers, resulting in high price penalties for low-grade iron ores. This might affect overall iron ore price dynamics by 50 percent other ways, depending on the amount of total iron ore demand. In a scenario, if total need for iron ore might be met solely with high-grade iron ores, it’s quite possible that benchmark iron ore prices will continue to be steady. However, price discounts for lower-grade ore would increase significantly, potentially pushing producers with this material from the market. In a alternative scenario, if low-grade ore is necessary to meet overall demand, both benchmark iron ore prices and discounts could increase significantly, to ensure low-grade producers would be in the market as the marginal suppliers.
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