Coking coal price surge squeezes Indian steelmakers

Indian steel mills are facing mounting margin pressure as coking coal prices have surged 25% year-on-year to average $236 per metric ton FOB Australia in the first seven months of 2026. The price increase is driven by supply disruptions in Australia, a major coal mine accident in Shanxi, China, and the ongoing US-Iran war, which has also raised freight and insurance costs. Metallurgical coal accounts for nearly 40% of steel production costs, and every $10 per ton increase adds $7-9 per ton to steelmaking costs. With limited ability to pass on costs due to competition from cheap Chinese steel, margins are squeezed, potentially delaying capacity expansion and investment. India, the world's second-largest crude steel producer, imports 95% of its coking coal needs, with at least half from Australia. Imports are expected to rise by 2-3 million tons in 2026-27 to around 66-67 million tons. Indian steelmakers, including Steel Authority of India Limited and Steel, are diversifying supply sources, turning to Mozambique, Russia, and the US, while seeking access to Mongolia despite logistical challenges.