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

Higher-priced coking coal is likely to get a new steel industry’s transition to greener production methods plus the value-based pricing of iron ore. Higher-priced coking coal boosts the price 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 cost is passed through. It will also accelerate saving money transition in steelmaking as emerging green technologies, for example hydrogen reduction, would be a little more competitive in contrast to established production methods sooner. The need 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, in order that they will need to measure the tariff of emerging technologies, including hydrogen-based direct reduced iron, and choose to switch 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 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 reduce, bringing about 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 can affect overall iron ore price dynamics by 50 % various ways, based on the a higher level total iron ore demand. In a scenario, if total need for iron ore might be met solely with high-grade iron ores, it’s likely that benchmark iron ore prices will stay steady. However, price reductions in price for lower-grade ore would increase significantly, potentially pushing producers of the material from the market. In a alternative scenario, if low-grade ore is required to meet overall demand, both benchmark iron ore prices and discounts could increase significantly, to ensure low-grade producers would remain in industry since the marginal suppliers.

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