Implications Of Higher-Priced Coke For The Steel And Iron Ore Markets

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 raises the cost of producing steel via blast furnaces, both in absolute terms and in accordance with other routes. This typically results in higher steel prices as raw material prices are undergone. It could also accelerate the green transition in steelmaking as emerging green technologies, including hydrogen reduction, would be competitive in comparison 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, in order that they will likely need to evaluate the price of emerging technologies, such as hydrogen-based direct reduced iron, and judge to replace their blast furnaces.

Increased coke prices would also modify the value-based pricing of iron ore. Prices many different 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 want more energy to lessen, ultimately causing higher coke rates in the blast furnace. Higher coking coal prices boost the cost penalty incurred by steelmakers, bringing about higher price penalties for low-grade iron ores. This can affect overall iron ore price dynamics by 50 percent different ways, based on the degree of total iron ore demand. A single scenario, if total need for iron ore could be met solely with high-grade iron ores, it is likely that benchmark iron ore prices will remain steady. However, price discounts for lower-grade ore would increase significantly, potentially pushing producers of the material out 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, so that low-grade producers would stay in the market as the marginal suppliers.

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