India's met coal shift fails shield steel sector from shocks
US sourcing shift does not shield steel from global price swings.
India’s push to diversify metallurgical (met) coal imports towards the US offers limited protection to its steel sector from price volatility or supply disruptions, according to an Institute for Energy Economics and Financial Analysis (IEEFA) report.
The report finds that global price linkages, higher freight costs, and limited US export capacity will constrain the role of US coal as a substitute for Australian supply, even as India expands its supplier base.
India imports about 90% of its met coal and plans to raise crude steel capacity to 300 million tonnes per annum by 2030.
Around 64% of capacity under development relies on coal-based blast furnace technology that requires imported met coal, deepening import dependence.
The analysis shows that Australia remains central to global pricing, accounting for nearly half of seaborne met coal exports, meaning disruptions there transmit across the market, including to US-origin coal.
Heavy rainfall and flooding in Queensland in January 2026 disrupted mining and logistics, pushing benchmark premium hard coking coal prices to $252.5 per tonne on 4 February, an 18-month high and more than 50% above levels seen in March 2025.
The report says freight economics weaken the case for US coal, as cargoes from the US travel longer distances to India than Australian shipments, raising transportation costs.
The West Asia conflict has added pressure on shipping fuel prices, increasing costs further, the report noted.
US export capacity also remains limited and is expected to decline, even as India’s demand rises, reducing the ability of US suppliers to replace Australian volumes at scale.
Technical factors in India’s steel sector add constraints, with many producers using stamp-charging processes optimised for blends of domestic and Australian coal, limiting the suitability of US coal in existing plants and increasing switching costs.
Saumya Nautiyal, Energy Finance Analyst – South Asia at IEEFA, said diversification alone will not address India’s exposure to global price volatility, supply disruptions, and climate-related risks in major exporting regions.
IEEFA recommends a shift away from coal-based blast furnace production towards scrap-based electric arc furnaces and the development of green hydrogen-based steelmaking to reduce long-term reliance on imported met coal.
