Higher-priced coking coal may well affect the steel industry’s transition to greener production methods and also the value-based pricing of iron ore. Higher-priced coking coal boosts the price of producing steel via blast furnaces, in absolute terms and in accordance with other routes. This typically brings about higher steel prices as raw material cost is passed through. It would also accelerate the pin transition in steelmaking as emerging green technologies, for example hydrogen reduction, would are more competitive in contrast to established production methods sooner. The call to reline or rebuild blast furnaces roughly every ten to 15 years at a cost that varies between $100 million and $300 million presents steelmakers with clear decision points, so that they will have to evaluate the expense of emerging technologies, like hydrogen-based direct reduced iron, and select to exchange their blast furnaces.
Increased coke prices would also affect the value-based pricing of iron ore. Prices many different qualities of iron ore products depend on their iron content and chemical (mainly phosphorus, alumina, and silica content) and physical composition (lumps versus fines versus pellets). Lower-quality iron ores require more energy to lessen, ultimately causing higher coke rates from the blast furnace. Higher coking coal prices improve the cost penalty incurred by steelmakers, ultimately causing high price penalties for low-grade iron ores. This could affect overall iron ore price dynamics by 50 percent other ways, based on the level of total iron ore demand. A single scenario, if total interest in 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 reductions for lower-grade ore would increase significantly, potentially pushing producers of the material from the market. In an alternative scenario, if low-grade ore is necessary to meet overall demand, both benchmark iron ore prices and discounts could increase significantly, to ensure low-grade producers would remain in the market industry since the marginal suppliers.
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