Whalesbook
India's steel sector is aiming to reach 300 million tonnes per annum (MTPA) of crude steel capacity by 2030, a goal that will significantly increase its demand for metallurgical coal. A substantial 64% of the 382 MTPA capacity currently under development will use coal-intensive blast furnace technology. This planned expansion alone could require an extra 140 MTPA of coal. Based on an average need of 770 kilogrammes per tonne of steel, this nearly doubles current supply levels.
Domestic Constraints and Import Reliance
Despite initiatives like 'Mission Coking Coal,' India's domestic coal reserves are mostly unsuitable for steelmaking due to high ash content. This forces the nation to import about 90% of its met coal. While diversification efforts have seen the United States become India's second-largest supplier, raising its share from 8% in FY21 to about 15% in FY25, this provides only limited relief.
Global Volatility and Supply Chain Risks
Switching suppliers does not shield India from global price swings. Australia remains the leading exporter of seaborne met coal, effectively setting global prices. Disruptions, such as the early 2026 Queensland flooding that sent benchmark prices soaring, show how sensitive the market is. US coal prices rose alongside, highlighting the market's interconnectedness. Climate-related disruptions are expected to increase, further worsening supply risks and price volatility.
Logistical and Technical Hurdles
Logistical challenges limit the advantages of using US coal. Shipments take 40-45 days to reach India, compared to 20-25 days from Australia, increasing freight costs and uncertainty. The West Asia crisis has further impacted shipping fuel costs. Furthermore, US export capacity is limited and expected to decline, weakening its potential as a long-term substitute. Technical constraints also play a role, with Indian steelmakers increasingly adopting stamp-charging technology that works best with blends of domestic and Australian coal, limiting the use of US coal in many plants.
Path Forward Recommended
IEEFA recommends cutting dependence on imported coal to improve energy security. The institute suggests speeding up steelmaking using scrap metal in electric arc furnaces and expanding green hydrogen production. Without a strategic shift to these alternatives, just diversifying suppliers won't fix the sector's core energy security issues.