India's Steel Mills Squeezed as Coking Coal Import Costs Hold Elevated
Indian steelmakers importing 95% of coking coal needs face mounting margin pressure as prices remain firm and diversification talks with Russia stay unresolved.
Newcastle physical coal held at $122.95 a tonne on Wednesday (2026-08-19), while the COAL ETF gained 2.35% in the same session — a sustained price environment that keeps the squeeze on Indian steel mills, which source around 95% of their coking coal from overseas despite holding an estimated 37.37 billion tonnes of domestic resources, oilprice.com reported in June (2026-06-09). The gap between endowment and utilisation is the core problem driving India's increasingly urgent search for alternatives.3
State-controlled mills are now exploring Russian assets as one route out. Officials from Steel Authority of India (SAIL) and NMDC are in talks with Russian counterparts about acquiring coking coal mines, oilprice.com reported, citing sources familiar with the discussions. Russian coking coal offers price advantages over Australian benchmark grades, and Moscow has clear incentive to cultivate Indian buyers as Western markets have closed off. But no terms have been disclosed, the discussions remain exploratory, and sanctions-related hurdles on financing and shipping make any transaction structurally complicated.3
India's diversification efforts away from dominant suppliers gained formal support in late January (2026-01-29), when the government designated coking coal as a critical and strategic mineral. The move brought coking coal under the mines law, designed to accelerate project clearances and attract private investment. Coal India and BCCL shares rose as much as 5% on the news, Moneycontrol reported. Faster approvals on paper have not yet translated into meaningfully higher domestic output, leaving the import dependency essentially unchanged.4,6,5
SAIL has also been casting further afield. In May 2025 (2025-05-05), the company planned to import a trial cargo of Mongolian coking coal and was considering airfreighting a sample to speed up quality testing, Reuters reported, citing two sources familiar with the matter. The willingness to absorb air-freight costs for a test cargo illustrates how acute the supply anxiety has become, even if Mongolia's landlocked geography makes large-scale commercial supply difficult.2
On the supply side, Chinese production added a constraint in June (2026-06-05). Safety inspectors tightened oversight across Shanxi mines following a coal mine accident coinciding with China's annual Safety Production Month. SMM data showed Lin Fen low-sulphur coking coal quoted at 1,800 yuan per tonne during that period. Stricter supervision in China's main coking coal belt tends to crimp near-term output, which filters into seaborne price support at a moment when Indian buyers are fully exposed.1
JSW Steel flagged an additional complication in July (2026-07-19). The company warned that surplus steel exports from China, Japan and Russia were at risk of being diverted to India as those countries sought alternative markets for volumes that could not move elsewhere. Cheap imported steel compresses domestic revenue just as raw material costs are climbing — pressure from two directions on the same margin line. JSW also noted that West Asia reconstruction demand after the ongoing conflict could provide some offset for Indian steelmakers, though the timing and scale remain unclear.7
Energy costs add a third layer of difficulty. India's steelmakers have also been grappling with a surge in gas and LPG prices linked to the Middle East conflict, steel analysts at the Institute for Energy Economics and Financial Analysis said in April 2026, oilprice.com reported. ICE Brent crude front-month was at $91.68 a barrel on Wednesday (2026-08-19), up 0.41% on the day, keeping energy-input costs firm across the region.3
Whether the Russian asset talks produce a signed deal before the next coking coal price cycle becomes a practical test of how seriously New Delhi and state mills are willing to commit capital to supply security. Absent a breakthrough there, Indian steelmakers remain exposed — buying the bulk of their most critical steelmaking input at global market rates they have limited ability to influence.