Significance Of Higher-Priced Coke For The Steel And Iron Ore Market Sectors

Higher-priced coking coal will probably affect the steel industry’s transition to greener production methods plus the value-based pricing of iron ore. Higher-priced coking coal increases the cost of producing steel via blast furnaces, in absolute terms and in accordance with other routes. This typically contributes to higher steel prices as raw material prices are undergone. It might also accelerate saving money transition in steelmaking as emerging green technologies, like hydrogen reduction, would become more competitive weighed against 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 should evaluate the price of emerging technologies, for example 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 depend upon their iron content along with their 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 inside the blast furnace. Higher coking coal prices improve the cost penalty suffered by steelmakers, ultimately causing higher price penalties for low-grade iron ores. This could affect overall iron ore price dynamics in two other ways, based on the degree of total iron ore demand. In 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 on this material from the market. In an alternative scenario, if low-grade ore is required 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 because marginal suppliers.

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