Key facts
- Premium coking coal prices (FOB Australia) increased by 25% in the first seven months of the year.
- India imports approximately 95% of its coking coal demand.
- Supply disruptions include slower mine ramp-ups, the Iran war, issues in Australia, and a mine explosion in China.
- Steelmaking coal prices strengthened due to strong Indian import demand and supply disruptions.
- Indian steelmakers face elevated coking coal costs without the ability to raise prices due to Chinese competition.
Indian steelmakers are facing significant pressure due to a 25% surge in coking coal prices during the first seven months of the year. This sharp increase, attributed to supply disruptions in key exporting nations like Australia and China, as well as geopolitical factors related to the Iran war, is squeezing profit margins and potentially delaying capacity expansion plans within India's steel industry.
India relies heavily on imports for its coking coal needs, sourcing approximately 95% of its demand from overseas. Metallurgical coal, essential for steel production, has seen its price climb due to a combination of factors including slower development of new mines, disruptions at Australian mines, and a deadly explosion in a Chinese coal mine. Mining giant BHP noted that strong Indian import demand, coupled with these supply issues, has tightened the seaborne market.
Analysts and industry executives anticipate that coking coal costs will remain elevated through the latter half of the year. This sustained high cost presents a challenge for Indian steelmakers, who are unable to pass these increased expenses onto consumers due to competition from Chinese steel producers. India has been expanding its steelmaking capacity, targeting 500 Mtpa by 2047, but the current cost environment poses a significant hurdle to achieving these ambitious goals.