Market Impact of Higher-Priced Coke on Steel And Iron Ore in India

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Market Impact of Higher-Priced Coke on Steel And Iron Ore in India The rise in fuel prices around the world affects many small things, from food to equipment. The price of fuel is a major factor in inflation around the world.

In an economy, the price is determined by the demand and supply of the commodity. If the supply of a commodity decreases but its demands stay the same then we notice an increase in the price of that commodity.

World affairs The Corona storm caused a great deal of damage to the supply chain of coal and its production. It is estimated that in the financial year of 2023, the price of imported coal will further increase by almost 50% compared to this year because of the Russia-Ukraine war and fuel politics in countries like the USA, Russia, China, Australia, and Saudi Arabia.

According to economists, coal demand will increase in India's economy next year, which is a sign of economic development and recovery in economic activity. Many world countries are attempting to pressure India to stop purchasing fuel from Russia and countries that have not supported Ukraine and condemned Russia for the war.

Several western countries are also thinking about placing sanctions on Russia, which would further disrupt the coal supply chain. Even after the embargo and other sanctions on Russia, the Indian government has said that it will continue to purchase coking coal from Russia.

Metallurgical coal Metallurgical coal or coking coal is a type of coal that can be used to produce great quality coke. Coke, iron ore, and scrap steel are used in blast furnaces to produce high-quality steel. The high demand for steel on the world market has increased the demand for coking coal. Almost 58% of exports of coking coal come from Australia through seaborne trade, which is one of the world's largest producers. Brazil, the USA, and Canada are major producers of coking coal.

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The trade war between China and Australia has been going on since the time of the pandemic and the Huawei saga, and these two countries play a significant role in world coal supply chains. In response to the trade war, Chinese authorities ordered some mills to stop importing coal from Australia. The cold war in trade between the US and China also affected the prices of coking coal.

Indian Government Even the ships that are used in exports use coal as fuel and we know how the high price of fuel impacts the price of commodities.

The Indian government saw that there is a high rise in the price of steel in India because of the high prices of coking coal and iron ore and exporting of steel to other countries. To decrease the prices of iron ore which ultimately decrease the price of steel in India.

The Indian government introduced duties on the export of steel and related items and abolished import duties on raw materials such as iron ore and coking coal.

Making India a circular economy is the right and much-needed step according to their spokesperson. The government wants to increase the consumption of steel and steel-related products in the country. The more we consume the more steel scrap we will make and it will make us less dependent on raw materials.

Due to a broken supply chain and world politics, the demand for coking and steel raw materials was extremely high all over the world.

In October, Steel prices reached a two-year low, and iron ore prices reached a 22-month low in October 2022 because of a 15 percent export levy and a 25-40% reduction in exports.

It won’t affect India that much if it continues purchasing coking coal from Russia.

But for some reason, if Russia can't supply coking coal for steel at a low price then it will impact the Indian economy.

There will be many effects on steel and iron ore and other industries if the price of coking coal increases and its supply gets affected:

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1. Price of steel will increase: The high cost of coking coal and low scrap steel availability will increase steel prices.

2. The price of constructing a house will increase: Iron and steel are major raw materials that are used in construction and if the price of coking coal increases then it will increase the cost of construction and will adversely affect the construction industry.

3. Steel demand will decrease: When prices rise, demand decreases, it is a common principle of the economy and if coking coke prices rise, steel prices will rise, which will affect steel demand.

4. Decrease steel consumption: High steel prices will decrease the steel demand and ultimately decrease the consumption of steel in the economy because no one wants to manufacture steel-related products or engage in construction activities because of the recession fear.

5. The steel industry will suffer: Because of high prices, low demand, and low consumption steel industry will suffer.

6. Iron ore price will increase: A rise in coking coal prices will have a significant impact on iron ore prices.

7. The target of the Circular economy will suffer: The high price of coking coal increases the steel production price through blast furnaces and ultimately increases the prices of steel and steel-related products. These increased prices will affect the consumption of steel in the economy, which will result in a decrease in steel production and a negative impact on our circular economy goal.

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