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

Higher-priced coking coal is likely to affect the steel industry’s transition to greener production methods as well as the value-based pricing of iron ore. Higher-priced coking coal enhances the cost of producing steel via blast furnaces, in the absolute terms and when compared with other routes. This typically leads to higher steel prices as raw material price is undergone. It could also accelerate the green transition in steelmaking as emerging green technologies, including hydrogen reduction, would are more competitive weighed against established production methods sooner. The requirement 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, so that they will need to appraise the expense of emerging technologies, like hydrogen-based direct reduced iron, and select 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 and chemical (mainly phosphorus, alumina, and silica content) and physical composition (lumps versus fines versus pellets). Lower-quality iron ores want more energy to scale back, bringing about higher coke rates within the blast furnace. Higher coking coal prices raise the cost penalty suffered by steelmakers, resulting in high price penalties for low-grade iron ores. This could affect overall iron ore price dynamics in 2 different methods, with regards to the a higher level total iron ore demand. A single scenario, if total demand for iron ore might be met solely with high-grade iron ores, chances are that benchmark iron ore prices will continue steady. However, price reduced prices for lower-grade ore would increase significantly, potentially pushing producers on this material out of the market. In a alternative scenario, if low-grade ore can be meet overall demand, both benchmark iron ore prices and discounts could increase significantly, to ensure low-grade producers would stay in the market industry as the marginal suppliers.

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