The Ministry of Steel has ordered state-owned SAIL and NMDC to acquire overseas mining assets, including coking coal and limestone. This move aims to reduce the 85-90% import reliance on critical raw materials and stabilize production costs. Investors may monitor how this capital-intensive strategy affects debt levels and long-term operating margins.
The Ministry of Steel has issued a directive to state-run giants Steel Authority of India Ltd (SAIL) and National Mineral Development Corporation (NMDC), ordering them to actively secure mineral assets in international markets. This government-backed push is designed to create a more reliable supply chain for India's steel industry by moving toward captive resource ownership.
Tackling Raw Material Dependency
For Indian steel producers, the cost and availability of raw materials are the biggest factors influencing profitability. Currently, the industry relies on imports for 85% to 90% of its coking coal needs, primarily from Australia and Mozambique. This high dependency makes domestic steel production vulnerable to global price spikes and supply disruptions. By directly owning and operating mines in regions like Australia, Indonesia, and Africa, the government aims to insulate Indian producers from these external price shocks, providing more predictable input costs.
This shift is supported by recent regulatory changes, such as the MMDR Amendment Act of 2026, which provides greater fiscal certainty for mining projects. The initiative essentially asks state-run companies to mimic the strategy of large private steelmakers that have already started building their own captive supply networks.
NMDC’s Diversification Strategy
For NMDC, this directive aligns with its internal long-term roadmap. The company, which is India's largest iron ore producer, is under pressure to move beyond its core business and reduce its sensitivity to iron ore price cycles. The management has set a goal to derive 20% of the company's total revenue from non-iron ore minerals—such as nickel, lithium, and copper—by 2030. Acquiring overseas assets provides a pathway to achieve this diversification while securing the minerals needed for high-tech and industrial applications.
Potential Risks and Financial Impact
While the strategic intent is to ensure supply security, the execution of this plan carries material risks that investors should monitor. Managing mining operations in foreign countries is complex, involving regulatory hurdles, geopolitical uncertainty, and the need for significant capital expenditure. If the companies need to borrow heavily to fund these acquisitions, it could lead to higher debt-to-equity ratios. Additionally, the success of these ventures will depend on the company’s ability to integrate foreign mines into their existing operations effectively without facing cost overruns or operational delays.
As of early October 2026, shares of NMDC were trading near ₹74.64, with the stock feeling pressure from broader market factors, including rising oil prices and foreign institutional investor outflows. The market reaction in the coming months will likely hinge on the specific details of the acquisition targets, the funding structure, and the projected timeline for the mines to become operational.