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

Higher-priced coking coal is likely to modify the steel industry’s transition to greener production methods and also the value-based pricing of iron ore. Higher-priced coking coal boosts the expense of producing steel via blast furnaces, in both absolute terms and compared to other routes. This typically leads to higher steel prices as raw material cost is undergone. It might also accelerate the green transition in steelmaking as emerging green technologies, for example hydrogen reduction, would be competitive weighed against established production methods sooner. The necessity 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 that they will need to assess the tariff of emerging technologies, such as hydrogen-based direct reduced iron, and judge to replace their blast furnaces.

Increased coke prices would also modify the value-based pricing of iron ore. Prices for several qualities of iron ore products depend 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 lessen, leading to higher coke rates within the blast furnace. Higher coking coal prices raise the cost penalty suffered by steelmakers, ultimately causing higher price penalties for low-grade iron ores. This might affect overall iron ore price dynamics in two other ways, with regards to the amount of total iron ore demand. In a scenario, if total demand for iron ore might be met solely with high-grade iron ores, chances are that benchmark iron ore prices will remain steady. However, price reductions in price for lower-grade ore would increase significantly, potentially pushing producers of the material 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 low-grade producers would remain in the market industry because marginal suppliers.

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