Indian steelmakers are facing a new cost problem. Global coking coal prices have risen sharply in recent months, putting pressure on steel mill margins at a time when competition from imported steel remains strong.
India depends heavily on overseas supplies for coking coal, making domestic steel producers particularly exposed to movements in the international market. Reuters reported that around 95% of India's coking coal requirement is met through imports, with Australia being the main supplier.
What is happening?
- Coking coal prices have risen 25% during 2026, with Australian premium hard coking coal averaging around $236 per tonne FOB.
- India imports about 95% of its coking coal, leaving steelmakers exposed to international prices, freight and supply disruptions.
- Imports could rise by up to 3 million tonnes in 2026-27 from around 64 million tonnes in the previous year.
- Australia remains India's biggest source, but steelmakers are increasingly looking at Russia, Mozambique and the US to diversify supplies.
- Higher coal costs are coming at a difficult time because cheaper imported steel is limiting the ability of Indian mills to fully pass these costs on to customers.
Why does this matter?
Coking coal is one of the biggest raw-material costs for a blast-furnace steelmaker. When coal prices move sharply, the impact is felt fairly quickly in production costs. The problem becomes bigger when finished steel prices do not rise at the same pace. This leaves mills with a choice: absorb the higher cost and accept lower margins, or increase steel prices and risk losing demand to cheaper imports. That is the situation Indian steelmakers are dealing with now.
The bigger concern is supply
The issue is not only the price of coal. Supply disruptions in Australia and China, along with geopolitical tensions, have made the international market less predictable. Freight and insurance costs can also increase when shipping routes are affected.
For Indian steelmakers, this makes diversification more important. Buying from more countries may reduce dependence on one supplier, although alternative sources may not always offer the same quality, price or logistics advantage.
What could happen next?
The immediate pressure on margins is likely to remain as long as coking coal prices stay elevated. Indian steel demand is still relatively strong, but mills cannot assume that higher raw-material costs can always be passed on to buyers. The competition from imported steel makes that even more difficult.
For the industry, the focus will therefore remain on coking coal prices, import volumes, freight costs and finished steel prices. India is adding steel capacity at a rapid pace. But unless raw-material supply keeps up at a reasonable cost, higher steel production will not necessarily translate into higher margins.
The key issue for Indian steelmakers right now is not just how much steel they can produce, but how much it will cost to produce it.
Disclaimer: This article is for information and market discussion purposes only. It is based on publicly available information and should not be considered investment or trading advice.