Higher-priced coking coal will probably modify the steel industry’s transition to greener production methods plus the value-based pricing of iron ore. Higher-priced coking coal raises the tariff of producing steel via blast furnaces, both in absolute terms and relative to other routes. This typically leads to higher steel prices as raw material costs are undergone. It would also accelerate the pin transition in steelmaking as emerging green technologies, like hydrogen reduction, would be competitive compared with established production methods sooner. The requirement 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, in order that they should measure the cost of emerging technologies, such as hydrogen-based direct reduced iron, and judge to replace 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 reduce, ultimately causing higher coke rates in the blast furnace. Higher coking coal prices boost the cost penalty suffered by steelmakers, ultimately causing higher price penalties for low-grade iron ores. This can affect overall iron ore price dynamics by 50 percent various ways, based on the degree of total iron ore demand. In one scenario, if total demand for iron ore may be met solely with high-grade iron ores, it is 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 the material out of your 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, so that low-grade producers would be in industry since the marginal suppliers.

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