Higher-priced coking coal probably will modify the 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 relative to other routes. This typically results in higher steel prices as raw material cost is passed through. It could also accelerate the green transition in steelmaking as emerging green technologies, like hydrogen reduction, would be a little more competitive in comparison with established production methods sooner. The call 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 likely need to appraise the expense of emerging technologies, such as hydrogen-based direct reduced iron, and judge to switch 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 upon their iron content and chemical (mainly phosphorus, alumina, and silica content) and physical composition (lumps versus fines versus pellets). Lower-quality iron ores want more energy to cut back, resulting in higher coke rates inside the blast furnace. Higher coking coal prices increase the cost penalty incurred by steelmakers, resulting in high price penalties for low-grade iron ores. This might affect overall iron ore price dynamics by 50 % other ways, with regards to the amount of total iron ore demand. A single scenario, if total interest in 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 with this 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, to ensure that low-grade producers would stay in the market industry because marginal suppliers.
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