India's draft National Steel Policy (NSP) Vision 2047 projects metallurgical coal demand to reach 284 million mt to support a steelmaking capacity of 604 million mt. However, the policy raises a critical question about where the required coal supplies will come from, the Institute for Energy Economics and Financial Analysis (IEEFA) said in a report on Thursday, October 29.
The report stated that metallurgical coal exports from Australia, Russia and Canada are expected to be lower in 2035 than in 2025. Australia, the largest exporter, has repeatedly revised its export forecasts downwards, IEEFA noted.
Uncertain metallurgical coal supplies pose energy security and price risks for India, the report said.
Coal-free steelmaking routes, including scrap-based steel production, steel recycling and hydrogen-based production, as proposed in the NSP, offer a way to reduce dependence on metallurgical coal, it added.
The IEEFA report noted that decarbonisation is identified as one of the key pillars of the policy, which includes proposals to develop a domestic steel scrap ecosystem, improve energy efficiency and increase steel production using electric arc furnaces (EAFs). The report says these would be positive developments.
However, the draft NSP notes that the share of steel produced via the blast furnace-basic oxygen furnace (BF-BOF) route will increase from the current 42 per cent to over 50 per cent by 2047. This, combined with the substantial increase in overall steel production during this period, will increase reliance on metallurgical coal.
The draft policy also highlights that coking coal requirements will increase from 72 million mt in 2025 to 236 million mt by 2047. Demand for another type of metallurgical coal, pulverised coal injection (PCI) coal, will rise from 17 million mt to 48 million mt, taking the total metallurgical coal requirement to 284 million mt in 2047.
The vast majority of India's metallurgical coal requirements are met through imports. According to the draft NSP, 92 per cent of India's coking coal comes from overseas, while PCI coal demand is “largely met through imports from Russia and Australia”.
The draft policy plans to increase domestic metallurgical coal supplies by building more coal washeries, optimising coal blending to increase domestic coal use, and reducing transportation bottlenecks. However, there are significant doubts about the effectiveness of these measures, and India is likely to remain highly dependent on metallurgical coal imports in 2047.
India's steel sector would, therefore, need to rely on a significant increase in global seaborne metallurgical coal trade by then. However, the likelihood of such an increase appears low, IEEFA said.
