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 raises the expense of producing steel via blast furnaces, in the absolute terms and in accordance with other routes. This typically leads to higher steel prices as raw material cost is undergone. It could also accelerate the hole transition in steelmaking as emerging green technologies, including hydrogen reduction, would become more competitive in contrast to established production methods sooner. The necessity 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 that they will likely need to appraise the cost of emerging technologies, like hydrogen-based direct reduced iron, and select to replace their blast furnaces.
Increased coke prices would also affect the value-based pricing of iron ore. Prices for various qualities of iron ore products depend on 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 require more energy to cut back, bringing about higher coke rates within the blast furnace. Higher coking coal prices improve the cost penalty incurred by steelmakers, resulting in higher price penalties for low-grade iron ores. This might affect overall iron ore price dynamics in two different ways, depending on the amount of total iron ore demand. A single scenario, if total demand for iron ore might be met solely with high-grade iron ores, it’s likely that benchmark iron ore prices will continue to be steady. However, price reduced prices for lower-grade ore would increase significantly, potentially pushing producers of this material out of the market. Within an alternative scenario, if low-grade ore is required to meet overall demand, both benchmark iron ore prices and discounts could increase significantly, to ensure that low-grade producers would remain in the market industry since the marginal suppliers.
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