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 boosts the cost of producing steel via blast furnaces, in the absolute terms and compared to other routes. This typically contributes to higher steel prices as raw material cost is passed through. It could also accelerate saving money transition in steelmaking as emerging green technologies, like hydrogen reduction, would are more competitive compared with established production methods sooner. The requirement to reline or rebuild blast furnaces roughly every ten to fifteen years at a price that varies between $100 million and $300 million presents steelmakers with clear decision points, so they really will likely need to measure the price of emerging technologies, including hydrogen-based direct reduced iron, and choose to exchange their blast furnaces.
Increased coke prices would also impact the value-based pricing of iron ore. Prices for different qualities of iron ore products rely 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 scale back, bringing about higher coke rates inside the blast furnace. Higher coking coal prices improve the cost penalty incurred by steelmakers, resulting in higher price penalties for low-grade iron ores. This might affect overall iron ore price dynamics in 2 different methods, depending on the degree of total iron ore demand. In a single scenario, if total interest in iron ore can be met solely with high-grade iron ores, it is likely that benchmark iron ore prices will remain steady. However, price reduced prices for lower-grade ore would increase significantly, potentially pushing producers of 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 continue in the market industry since the marginal suppliers.
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