Higher-priced coking coal probably will modify the steel industry’s transition to greener production methods along with the value-based pricing of iron ore. Higher-priced coking coal increases the expense of producing steel via blast furnaces, in the absolute terms and in accordance with other routes. This typically contributes to higher steel prices as raw material costs are undergone. It could also accelerate the hole transition in steelmaking as emerging green technologies, for example hydrogen reduction, would become more competitive in contrast to established production methods sooner. The need 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 they will likely need to measure the tariff 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 many different qualities of iron ore products rely upon 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 want more energy to reduce, leading to higher coke rates within the blast furnace. Higher coking coal prices increase the cost penalty suffered by steelmakers, resulting in high price penalties for low-grade iron ores. This may affect overall iron ore price dynamics by 50 % various ways, with regards to the level of total iron ore demand. A single scenario, if total need for iron ore could 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 your market. In a 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 be in the market industry since the marginal suppliers.
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