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

Higher-priced coking coal may well modify the steel industry’s transition to greener production methods along with the value-based pricing of iron ore. Higher-priced coking coal enhances the expense 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 costs are undergone. It might also accelerate the pin transition in steelmaking as emerging green technologies, such as hydrogen reduction, would be a little more competitive compared with established production methods sooner. The call 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 have to evaluate the expense of emerging technologies, like hydrogen-based direct reduced iron, and decide to switch their blast furnaces.

Increased coke prices would also modify the value-based pricing of iron ore. Prices many 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 reduce, resulting in higher coke rates within 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 can affect overall iron ore price dynamics in 2 different ways, with respect to the amount of total iron ore demand. In a single scenario, if total requirement for iron ore might be met solely with high-grade iron ores, it’s likely that benchmark iron ore prices will remain steady. However, price reductions in price for lower-grade ore would increase significantly, potentially pushing producers on this material out of the market. In a alternative scenario, if low-grade ore can be meet overall demand, both benchmark iron ore prices and discounts could increase significantly, to ensure that low-grade producers would remain in the market industry as the marginal suppliers.

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