India's steel sector faces growing energy security risks as 90 percent of its metallurgical coal is imported and another 64 percent of its planned capacity is also coal-based, according to a report released by the Institute for Energy Economics and Financial Analysis (IEFA) on Monday.
The report found that diversification into US coal supplies offers only limited relief in a globally interconnected and uncertain world. market.
India's target of achieving 300 million tonnes per annum steel production capacity by 2030 should lead to a surge in coal demand. In addition, 64 percent of new steel capacity will also use the blast furnace coal route.
With an average requirement of 770 kg of metallic coal per tonne of steel, planned blast furnace capacity alone could require an additional 140 million tons of coal, almost double the current supply level, the report said.
Despite policy efforts to increase domestic production, including Mission Coking Coal, India's reserves are falling. remain largely unsuitable for steel production due to high ash content, leaving the country dependent on imports for about 90 percent of its coal needs, he added.
The United States has become India's second-largest supplier of metallic coal, with its share rising from about eight percent in 2020-21 to about 15 percent in 2024-25.
However, data IEEFA that switching suppliers does not protect India from global price volatility. Australia continues to dominate seaborne coal exports, accounting for nearly half of global supply and serving as a key price setter.
Logistics and structural factors continue to limit the competitiveness of US coal. Freight from the US to India takes 40-45 days compared to 20-25 days from Australia, adding to freight costs and uncertainty in the supply chain. While U.S. coal may be cheaper when shipped for free, higher transportation costs often offset this advantage.
Freight economics are a key factor. Longer distances for U.S. cargo mean higher freight costs, now exacerbated by the crisis in West Asia and the impact on fuel transportation, the report says.
IEEFA says reducing dependence on imported coal is important for long-term energy security, while it recommends speeding up steel production in electric arc plants.
