India-US met coal trade unlikely to shield steel sector from price shocks, supply risks

Mumbai: India’s dependence on imported metallurgical (met) coal — currently meeting about 90% of its needs — is set to increase as the country expands steel capacity. With a target of 300 million tonnes per annum (MTPA) of crude steel capacity by 2030, nearly 64% of upcoming capacity will rely on coal-based blast furnace (BF) technology, which requires imported met coal.

A briefing by the Institute for Energy Economics and Financial Analysis (IEEFA), titled ‘US met coal offers limited relief for India’s steel energy security’, says efforts to diversify imports towards the United States are unlikely to significantly reduce risks. Despite recent bilateral trade engagement and concerns following the West Asia conflict, structural challenges remain.

The report highlights that global price linkages, higher freight costs, limited US export capacity, and technical constraints in Indian plants weaken the case for US coal as a reliable alternative.

Australia’s dominance shapes prices

Although India has diversified suppliers, Australia still accounts for nearly half of global seaborne met coal exports. This dominance means disruptions there affect global prices, including US-origin coal.

In January 2026, heavy rainfall and flooding in Queensland disrupted mining and logistics, pushing benchmark premium Australian hard coking coal prices to USD 252.5 per tonne (INR 23,404) on February 4 — an 18-month high and over 50% higher than March 2025 lows.

Freight costs, capacity limits pose challenges

US coal faces structural disadvantages. Longer shipping distances to India increase freight costs compared to Australian supplies, eroding competitiveness.

“Freight economics are critical. Longer distances for US cargoes mean higher costs, worsened by the West Asia crisis and its impact on shipping fuel,” said Simon Nicholas, IEEFA’s Global Lead Analyst for Steel.

US export capacity is also limited and expected to decline, even as India’s demand grows, reducing its reliability as a long-term supplier.

Further, Indian steelmakers are adopting stamp-charging technology optimised for domestic and Australian coal blends, limiting compatibility with US coal and increasing switching costs.

Beyond diversification

The report concludes diversification alone cannot address India’s energy security risks.

“Even with diversified supply, India remains exposed to price volatility, supply disruptions, and climate risks,” said Saumya Nautiyal, Energy Finance Analyst (South Asia), IEEFA.

IEEFA recommends accelerating scrap-based electric arc furnace steelmaking and scaling up green hydrogen-based production. Reducing reliance on imported met coal will be crucial for building a more resilient and low-carbon steel sector aligned with India’s energy security goals.