FERROUS SERIES: India boosts coking coal diversification amid rising steel output

India is intensifying its efforts to diversify the supply of coking coal, a crucial raw material, as its crude steel production consistently grows each year.

The supply and pricing of coking coal have been major challenges for the Indian steel industry due to its heavy reliance on imports. This reliance prompted Prime Minister Narendra Modi to urge the industry to explore alternatives to mitigate import dependency, considering its substantial impact on both steelmaking costs and the Indian economy.

Although India's dependence on imports is unlikely to diminish in the near future, steelmakers in the country have started devising strategies to secure coking coal by diversifying supply sources, investing in overseas assets and increasing the utilization of domestic coking coal.

Australian decline

India's coking coal imports from Australia have contracted for the third straight year, even as overall imports remained largely unchanged.

In 2024, imports from Australia totaled 25.84 million mt, nearly 11% lower than in 2023 and about 20% lower than in 2022, according to data from S&P Global Market Intelligence's Global Trade Analytics Suite. Simultaneously, overall imports were 56.90 million mt in 2024, compared with 56.54 million mt in 2023 and 57.01 million mt in 2022.

Indian mills have been increasingly seeking to diversify their coal blends by incorporating a wider variety of coals from the US, Russia and Mozambique. However, as they are relatively new to understanding the properties and ranks of coal from these various origins, they still have much to learn from the Chinese, who are often referred to as the "masters of blending."

"We do not want to be susceptible to the risk of relying on limited suppliers," a source at a major Indian steelmaker said. "Prices fluctuate too heavily across our entire procurement just because of localized weather events, or suppliers' own issues."

An import quota on met coke imposed by the Indian government in the first half of 2025 has led merchant coke producers to opt for more economical alternatives by utilizing a greater amount of low-volatile-matter hard coking coals from Russia, Canada and the US, contrary to the previously anticipated rise in demand for Australian coals.

"We have many options from non-Australian origins and our first preference will be for them, given the higher prices of Australian coals, which are just unworkable at $10-$20/mt premium if not more," a merchant coke producer said.

Despite efforts to experiment with newer coals, the Australian supply continues to be the primary source for major Indian integrated mills. This is because their expansions are largely based on the use of larger blast furnaces, which require premium coals.

"India uses higher quality coke also because of the type of iron ore that we have," an Indian steelmaker said. "So, it is not as easy to be swinging too much away from a coking coal source that provides those qualities that we need for our blends."

India's attraction

The increased availability of coking coal options for Indian mills has also encouraged diversification.

Smaller mills now have the opportunity to procure partial cargo quantities on an India-delivered basis, providing them with the flexibility to experiment with their blends.

To tap into this expanding market, Platts, part of S&P Global Commodity Insights, began assessing the daily Premium Mid Vol Hard Coking Coal CFR India price assessment since October 2024, with a volume specification of 10,000-25,000 mt, encompassing both Australian and non-Australian origins.

Although, to a large extent, spot deals into India are still primarily concluded on an FOB Australia basis.

In the first four months of 2025, Platts recorded 28 premium hard coking coal spot trades on an FOB Australia incoterm basis, destined for India, compared with only seven during the same period in 2024.

Following the launch of the Premium Mid Vol Hard Coking Coal CFR India assessment, Platts recorded 13 transactions over January-April on a CFR India incoterm basis, compared with five in 2024.

With the new assessment enhancing price transparency in the secondary market for CFR India cargoes, where a Panamax shipment is divided into smaller parcels, Indian market participants have increasingly reported using it in price negotiations, although most still refer to the Premium Low Vol Hard Coking Coal FOB Australia benchmark.

Market sources said the growth of spot liquidity on a CFR India basis would depend on whether major Indian mills continue to buy on an FOB Australia basis, and if smaller buyers increase their purchases in the secondary market.

Meanwhile, China's growing absence in the spot seaborne market boosted India's market attractiveness. Both international and Chinese coking coal traders, who were previously heavily or solely focused on sales to China, have been shifting more of their attention toward India.

"We have not had much to do over the past few months, and we must diversify our sales channels," said a source from a large Chinese trading house.

Another prominent Chinese trader has already made more customer visits to India in the first five months of the year than a year ago.

"There are, of course, risks that we might not be familiar with," a third Chinese trader said. "Such as lengthy credit terms, or effectively performing split bills of lading sales to multiple buyers. We do not have the ability to do stock and sale there in the event we are unable to sell off a full vessel's position."

Chinese traders have echoed concerns that trading directly with Indian end-users was not an easy feat to accomplish overnight. Therefore, they were exploring options to sell to traders who were already established in India's market.

Chinese traders identified trading companies such as Trafigura, Vitol, IMR Resources, JSW International, Visa Commodities, Avani and Lotus Resources as counterparties for selling to India.

Supply security

The Indian government's emphasis on infrastructure suggests a positive outlook for the country's steel consumption growth, encouraging Indian mills to expand, according to market sources.

This has spurred Indian mills to secure the raw material "by all means necessary."

India is expanding its investments and interest in overseas coking coal assets, exemplified by JSW Steel buying a stake in Australia's Illawarra met coal mine in 2024, and NMDC seeking to acquire mines in Indonesia and Australia.

India has also been exploring ways to secure Mongolian coking coal supplies, despite the inherent logistical challenges posed by Mongolia's landlocked geography.

Additionally, interest in Indian domestic coking coal has surged, despite concerns about its high ash content. Mills have been finding ways to blend it to reduce costs while also seeking to expand washing capacities within the country.

According to a forecast by Commodity Insights analysts, India's apparent steel consumption is forecast to grow from 149.8 million mt in 2025 to 228 million mt in 2035.

India's coking coal imports are projected to expand from 64 million mt in 2025 to 153 million mt in 2035.