Higher-priced coking coal will probably modify the steel industry’s transition to greener production methods as well as the value-based pricing of iron ore. Higher-priced coking coal increases the cost of producing steel via blast furnaces, in both absolute terms and compared to other routes. This typically contributes to higher steel prices as raw material prices are passed through. It could also accelerate the hole transition in steelmaking as emerging green technologies, for example hydrogen reduction, would be competitive in comparison with established production methods sooner. The requirement to reline or rebuild blast furnaces roughly every ten to fifteen years at a cost that varies between $100 million and $300 million presents steelmakers with clear decision points, so they will need to assess the price of emerging technologies, like hydrogen-based direct reduced iron, and decide to exchange their blast furnaces.
Increased coke prices would also affect the value-based pricing of iron ore. Prices for different qualities of iron ore products depend 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, ultimately causing higher coke rates inside the blast furnace. Higher coking coal prices improve the cost penalty incurred by steelmakers, ultimately causing higher price penalties for low-grade iron ores. This could affect overall iron ore price dynamics by 50 percent different methods, depending on the a higher level total iron ore demand. In one scenario, if total need for iron ore can be met solely with high-grade iron ores, it is likely that benchmark iron ore prices will continue to be steady. However, price reductions for lower-grade ore would increase significantly, potentially pushing producers with this material out of your market. Within 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 because marginal suppliers.
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