India's Steelmakers Absorb Coking Coal's Biggest Monthly Surge on Record
Dalian coking coal futures posted a record 46% monthly gain in August, compounding a 25% rise in Australian export prices and squeezing margins for Indian producers who import almost all they use.
Coking coal futures on China's Dalian Commodity Exchange rose 6% on Monday (2026-08-31) and closed August with a 46% monthly gain — the biggest since the contract began trading in 2013, Bloomberg data showed. The August surge eclipsed the previous record of 38% set in July 2025, and it arrived when Indian steelmakers were already contending with a separate wave of cost pressure from Australian supply.8
India imports around 95% of the coking coal that feeds its blast furnaces. It is the world's second-largest crude steel producer after China. A sustained jump in benchmark prices lands almost directly on domestic producers' cost lines, with little room to hedge through domestic substitution.8,4
The Dalian move has been building since May, when a mining disaster in Shanxi province removed a meaningful slice of Chinese domestic output. Beijing's response — heightened safety inspections across the region — slowed mine resumptions for months. Sunsirs noted that strict oversight in Shanxi and a deep futures discount have provided strong price support, making a sharp decline in physical prices unlikely. By early June (2026-06-05), Lin Fen low-sulphur coking coal was already quoted at 1,800 yuan per tonne at Shanxi, according to SMM's daily briefing.8,5,1
Australia added a second front. The price of premium coking coal freight on board in Australia surged 25% in the first seven months of 2026 compared with the same period a year earlier, driven by a series of supply disruptions of its own, Reuters reported. The prolonged U.S.-Iran conflict has complicated shipping logistics further, with temporary diesel availability issues disrupting construction and logistics activity that feeds back into finished steel demand, SMM Analysis noted.6,4,3
Indian steel mills are facing mounting margin pressure, executives and analysts told Reuters. The country imports around 64 million tonnes of metallurgical coal annually. Commodities consultancy BigMint expects that volume to rise by a further 2 million to 3 million tonnes in 2026-27 as domestic output grows. Larger import volumes at elevated spot prices mean the cost burden compounds rather than plateaus.4
India's coal import mix reflects the shift. Metallurgical coal imports rose sharply in fiscal 2025-26 even as dependence on imported thermal coal declined, according to an MCX report. Steel-grade coal is increasingly the dominant driver of the country's overall coal import bill.7
JSW Steel reported a 10% year-on-year rise in consolidated revenue to ₹47,364 crore in the April-June quarter, beating a Bloomberg consensus of ₹45,109 crore polled from 23 analysts. But that result predates coking coal's record August move. The company is targeting 8% growth in domestic Indian steel demand this year, translating into an additional 12 million to 13 million tonnes of consumption. Volume growth spreads fixed costs but provides no relief on raw materials.2
To reduce reliance on Australian supply, JSW Steel has begun trialing Mozambican coking coal in its blend, with initial trials described as successful. The company is also blending higher quantities of domestic Indian coal — typically higher in ash content — to limit exposure to imported spot prices, management said. Neither approach is close to replacing the scale of Australian imports.2
Freddie Brooks, commodities analyst at BMI, a unit of Fitch Solutions, said costs are likely to remain high through the second half of the year, partly because the Shanxi supply loss has not been recovered. Analysts cited by Reuters shared the view, with elevated coking coal costs for Indian producers now broadly expected to persist at least through year-end.4,6
JSW Steel's management pointed to West Asia reconstruction as a potential demand tailwind that could support higher realized steel prices. But a regional demand uptick, even if it materializes, is unlikely to move quickly enough to offset a raw material cost surge now running into its fifth consecutive month.2
The pace of mine resumptions in Shanxi is the clearest near-term variable. If Chinese domestic output recovers faster than safety inspectors have allowed, Dalian futures could retrace some of August's extraordinary gain and ease pressure on Australian spot pricing indirectly. But Sunsirs and BMI both flag the deep futures discount as a structural deterrent to rapid Chinese production recovery — which means the pressure on Indian steelmakers shows no obvious exit.5,4