India’s steel sector faces mounting energy security risks as 90 percent of its metallurgical coal is imported and a further 64 percent of planned capacities are also coal-based, according to a report issued by the Institute for Energy Economics and Financial Analysis (IEEFA) on Monday.
The report showed that diversification towards US coal supplies offers only limited relief in a globally interconnected and volatile market.
India’s target of reaching 300 million mt per year of crude steel capacity by 2030 is set to drive a sharp increase in met coal demand. Furthermore, 64 percent of new steel capacities will also use the coal-based BF route.
At an average requirement of 770 kg of met coal per mt of steel, the planned BF capacity alone could require an additional 140 million mt of coal, nearly doubling current supply levels, the report said.
Despite policy efforts to boost domestic production, including “Mission Coking Coal”, India’s reserves remain largely unsuitable for steelmaking due to high ash content, leaving the country reliant on imports for about 90 percent of its met coal needs, it added.
The United States has emerged as India’s second-largest supplier of met coal, with its share rising from about eight percent in 2020-21 to roughly 15 percent in 2024-25.
However, the IEEFA said that that shifting suppliers does not shield India from global price volatility. Australia continues to dominate seaborne met coal exports, accounting for nearly half of global supply and acting as the key price setter.
Logistical and structural factors continue to limit the competitiveness of US coal. Shipments from the US take 40-45 days to reach India, compared to 20-25 days from Australia, increasing freight costs and supply chain uncertainty. While US coal may be cheaper on a free-on-board basis, higher transportation costs often erode this advantage.
Freight economics are a key factor. The longer distance for US cargoes means higher freight costs, now exacerbated by the West Asia crisis and the impact on shipping fuel, the report said.
The IEEFA argues that reducing dependence on imported coal is essential for long-term energy security, while it recommends accelerating scrap-based electric arc furnace steelmaking and scaling up green hydrogen-based production.