Higher-priced coking coal probably will get a new steel industry’s transition to greener production methods as well as the value-based pricing of iron ore. Higher-priced coking coal enhances the tariff of producing steel via blast furnaces, both in absolute terms and when compared with other routes. This typically brings about higher steel prices as raw material cost is passed through. It could also accelerate saving money transition in steelmaking as emerging green technologies, including 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 cost that varies between $100 million and $300 million presents steelmakers with clear decision points, so that they will have to assess the cost of emerging technologies, such as hydrogen-based direct reduced iron, and judge to exchange their blast furnaces.
Increased coke prices would also affect the value-based pricing of iron ore. Prices for several 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 want more energy to reduce, ultimately causing higher coke rates inside the blast furnace. Higher coking coal prices raise the cost penalty incurred by steelmakers, bringing about high price penalties for low-grade iron ores. This might affect overall iron ore price dynamics by 50 % various ways, depending on the a higher level total iron ore demand. In one scenario, if total demand for iron ore may be met solely with high-grade iron ores, it is likely 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 out of your market. In the alternative scenario, if low-grade ore is needed to meet overall demand, both benchmark iron ore prices and discounts could increase significantly, so that low-grade producers would be in industry because marginal suppliers.
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