Higher-priced coking coal may well get a new steel industry’s transition to greener production methods and also the value-based pricing of iron ore. Higher-priced coking coal enhances the tariff of producing steel via blast furnaces, in the absolute terms and when compared with other routes. This typically contributes to higher steel prices as raw material price is passed through. It could also accelerate saving money transition in steelmaking as emerging green technologies, such as hydrogen reduction, would become more competitive compared with established production methods sooner. The necessity to reline or rebuild blast furnaces roughly every ten to 15 years at a price that varies between $100 million and $300 million presents steelmakers with clear decision points, so that they will have to appraise the expense of emerging technologies, such as hydrogen-based direct reduced iron, and choose to replace their blast furnaces.
Increased coke prices would also impact the value-based pricing of iron ore. Prices many different qualities of iron ore products rely on 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 require more energy to scale back, bringing about higher coke rates inside the blast furnace. Higher coking coal prices increase the cost penalty suffered by steelmakers, leading to higher price penalties for low-grade iron ores. This might affect overall iron ore price dynamics in 2 other ways, with regards to the degree of total iron ore demand. In a single scenario, if total interest in iron ore can be met solely with high-grade iron ores, chances are that benchmark iron ore prices will continue to be steady. However, price reductions for lower-grade ore would increase significantly, potentially pushing producers of this material out from 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 that low-grade producers would continue in the market since the marginal suppliers.
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