Key Takeaways
- Steel Authority of India (SAIL) has airlifted a 1-metric-ton sample of Mongolian coking coal.
- The move aims to diversify supplies and reduce dependence on Australia.
- Transporting coal from Mongolia to India remains a significant challenge.
Steel Authority of India (SAIL) has conducted a trial by airlifting a 1-metric-ton sample of Mongolian coking coal, marking the first such import. The state-backed steelmaker is assessing whether the coal meets its steelmaking requirements.
This trial is part of India’s broader strategy to diversify its coking coal supplies, which currently rely heavily on Australia, with imports accounting for nearly 95% of its needs. Coking coal constitutes about 40% of steel production costs.
The decision to test Mongolian coal comes as India seeks to reduce its dependence on Australia, which has been a major supplier but has faced geopolitical tensions. India’s second-largest steel producer, SAIL, had planned the trial last year, as reported by Reuters.
Mongolia, a landlocked nation between Russia and China, poses logistical challenges for coal imports. India would likely need to rely on a longer route through Russia, which is favored due to strategic concerns involving China. Relations between India and China have remained tense since a deadly border clash in 2020.
SAIL will base its decision on long-term supplies from Mongolia on the coal’s suitability, cost, and feasibility of transportation. Shipping the coal via Russia would make it significantly more expensive than competing supplies, although its quality is superior, according to a metallurgical coal analyst.
India and Mongolia agreed last year to work towards securing coking coal and copper supplies for Indian companies. As India expands its steel production, it will require substantially more coking coal, most of which will need to be imported, increasing global supply pressures.
India’s coking coal imports are expected to rise by 3% to 5% in 2026/27 from 64 million tons a year earlier, according to commodities consultancy BigMint. Australia is expected to remain India’s largest supplier, although imports from Russia, Mozambique, and the US are also forecast to increase.
Indian steelmakers have raised prices in recent weeks due to increased coking coal costs and revived domestic demand, as reported by Reuters earlier this month.
