Insight Conversation: Gilberto Cardoso, Tarraco Commodities

India has emerged as the largest player in the global seaborne coking coal market, surpassing traditionally stronger players like China and Japan. The country's coking coal growth story hinges on the economic and infrastructure trends that have remained solid in the past few years and are directly connected to higher steel demand in the country.

Gilberto Cardoso, founder and CEO of Tarraco Commodities, talks to Rohan Somwanshi about India's growth and options to diversify coking coal imports, as well as global decarbonization trends in the mining sector.

Cardoso has over 20 years of experience in the metals and mining sector. He played pioneer roles at ArcelorMittal and BHP, which included charting future assets and investment decisions for iron ore, metallurgical coal and nickel. His company, Tarraco, provides consulting and advisory solutions to leading global companies, and also looks at sustainable technologies aimed at steel decarbonization.

By 2030, it could be a little bit tricky, with less than seven years going forward. But I think, even if India does not achieve the target, it's still going to be very close because there is a number of large projects coming on stream in the country.

Indian industries are growing fast. On the economy side, India is outpacing China in terms of GDP growth. But then a lot of things must be done in India. It's a huge country with a big population and it needs huge investments in infrastructure.

I'm very bullish on India's demand growth story. Higher demand for steel is expected and upcoming projects will meet this demand.

India's coking coal buyers depend heavily on Australia. Will they look to diversify their purchases?

I think India will develop an interesting strategy for procurement: balancing high-grade coking coal with sometimes mid-grade or the low-vol, mid-vols coals. And it's very difficult to be out of Australia.

The majority of coal brands into India will definitely come from Australia. However, some emerging markets are going to come into the picture. There's a lot of potential in Indonesia as there are a lot of projects going on in the Southeast Asia country. There is a lot of mergers and acquisitions in the region.

From India's perspective, anthracite and coking coal will still be probably available from Russia because India does not have any kind of trade restrictions with Russia yet. But the main portion of India's imports will come from Australia.

India has emerged as the largest influencer in seaborne metallurgical coal markets. What will be their buying strategy going forward?

Since India does not have any high-quality coal, I always like to compare the country with Brazil. In Brazil, we have iron ore, but we don't have high-quality coking coal. Similarly, India has big reserves of iron ore but the quality of available coal is not that good, so India seeks seaborne coal imports.

Brazil relies 100% on its coking coal requirements. India, with all the potential steel capacity expansion, has to rely heavily on imported coal.

They will focus on importing of high-quality coals and also reducing emissions. But India's strategy will be to look for different sources and not rely 100% on one country, while also trying to balance coal grades.

What is the impact of policies like carbon border adjustment mechanism, that are focused on reducing emissions, on miners? Can you give an example from the perspective of Brazil's mining sector?

Everybody now would like to track their carbon footprint due to the CBAM. You have to make it official right from the first step of production to the final product you are sending, detailing the carbon content of the product.

Initially, the CBAM will track imports at a broader scale. But in future, they will track cargo by cargo. And when the auditing becomes so granular, everybody will be focusing on capturing and tracking carbon content through the full production chain.

Companies like Vale in Brazil are pretty much focused on mapping carbon. They are covering all three scopes of emissions. They invested to increase the usage of hydropower in order to reduce scope 2 emissions. Under scope 1, Vale is focusing on different processes to reduce carbon dioxide. They launched "green briquette" project to have low-carbon iron ore.

Mapping carbon is pretty much on the table of every CEO of a mining company or even a steel company in Brazil. These companies are also looking to build projects to reduce emissions and track the entire supply value chain.

How is the global coking coal industry adapting to the fast-paced changes around decarbonization trends? How is it impacting the industry?

If we look through the lens of green transition, it is definitely a challenge for the industry. We probably may never achieve 100% green steel because it's quite difficult to change the 1.6-billion mt steel industry. There will be some countries in Asia and Africa that will still rely on an integrated steel process, like blast furnaces and sintering plants.

Of course, the industry also has to focus on quality, look at better optimization of material mix and try to have high-quality products because such products can reduce the coke rate.

The industry has to transform itself to use high-quality material. The industry probably needs to develop partnerships and even focus on research and development projects. I've seen some products coming out where steelmakers have partnered with stakeholders e yield of coking batteries.

There is a long way for the coking coal industry, but we need to adapt.