A new report from the US-based Institute for Energy Economics and Financial Analysis (IEEFA) has warned that India must accelerate efforts to reduce its heavy dependence on imported metallurgical (met) coal, particularly from Australia, or face growing long-term energy security risks in its steel sector. As India aims to reach 300 million mt per year of crude steel capacity by 2030, its reliance on blast furnace (BF) technology leaves the industry heavily exposed to met coal supply disruptions.
Domestic coal reserves are unsuitable for BF operations due to high ash and sulfur content, leaving India dependent on imports for approximately 90 percent of its met coal. Australia remains the dominant supplier, making India’s steel sector sensitive to Australian market conditions and export decisions.
Australian met coal faces a growing risk landscape
The IEEFA highlighted a growing set of risks facing Australian met coal supply that could expose Indian steelmakers to future shortages and structural price increases. These risks include overly optimistic Australian export projections, slowing mine development, higher financial and regulatory barriers, escalating mining costs, legal constraints linked to methane emissions, and increased price volatility associated with climate-related disruptions. It was noted that Australian courts are increasingly blocking coal expansions on climate grounds.
Australia’s 2050 net-zero target, two decades earlier than India’s 2070 goal, is expected to intensify domestic emissions-reduction efforts, adding further constraints.
The country’s signature of the Belém Declaration at the UN Climate Change Conference (COP30) in November 2025, committing to a rapid and just transition away from coal, oil and gas, reinforces these long-term pressures.
Long-standing supply challenges exacerbate future risks
The IEEFA highlights structural constraints that predate climate policy shifts, including rising coking coal production costs, mining companies increasingly favoring the acquisition of existing assets over greenfield development, growing difficulty of methane mitigation and withdrawal of financing for new met coal mines by major Australian banks.
Given these trends, the report warns that India’s continued BF expansion could expose the sector to sustained price volatility and potential shortages.
India must accelerate alternative steelmaking pathways
To mitigate these risks, the IEEFA has recommended that India scale up steelmaking routes that do not rely on met coal. Key pathways include scrap-based electric arc furnaces (EAFs), green hydrogen-based direct reduced iron (DRI) technologies and policy incentives to support low-carbon steelmaking and accelerate technology adoption.
Co-author Saumya Nautiyal emphasized that India is well positioned to become a globally competitive green hydrogen producer, but that prioritizing domestic use in steelmaking will be essential for energy security.
Low-carbon technologies to strengthen energy security
According to the IEEFA, accelerating the transition toward EAF- and hydrogen-based steelmaking would reduce India’s exposure to uncertain global met coal markets, improve long-term cost stability, strengthen competitiveness in emerging low-carbon steel supply chains and support the next phase of India’s broader industrial and energy transition.
