31 May 2023
After crude oil, the import of yet another key Russian resource is set to flood the Indian market in the years ahead: coking coal. The reasons remain the same—lower prices, quicker deliveries, and supply diversification.
Russia’s supply of coking coal—the prime raw material in steelmaking—may more than double in FY24, led by state-owned Steel Authority of India Ltd and private steelmakers such as JSW Steel Ltd and Jindal Steel and Power Ltd (JSPL), two officials aware of the matter said. India’s coking coal imports stood at 54 million tonnes (mt) in FY23, and these imports will account for a fifth of it this year, they said on condition of anonymity. Imports of Russian coking coal in FY23 stood at a mere 4 mt.
About 90% of India’s coking coal requirement of 60 mt is currently imported, of which Australia alone contributes more than 70%. India has been looking to diversify its imports of steelmaking coal and identified a few markets. Russia has now emerged as a preferred source due to its pricing and ability to deliver it quickly, one of the two officials cited above said.
“Diversification of sources of import is always good as it prevents choking of supplies on account of various environmental disturbances and the emergence of sudden geo-political events. However, it is for the companies to decide on new import markets based on their assessment of quality and the price matrix," steel secretary Nagendra Nath Sinha said in an interview.
India’s steel and energy ministries signed a memorandum of understanding with Russia in October 2021 to develop coking coal sources, procure the raw material and collaborate on mining and steel manufacturing technologies. JSW and JSPL began procuring Russian coking coal in 2022, and SAIL has begun making test purchases. All three have plans to increase procurement from FY24, said one of the two officials quoted above.
“SAIL imports around 17 mt of metallurgical coal on an annual basis from different sources. To enhance the vendor base and reduce dependence on existing sources, SAIL had been looking to add new geographies such as Russia for procurement of coking coal," the company said in an emailed response to a query.
“During FY23, about 300,000 tonnes of coking coal was procured from Russia as a trial. As the coal was found suitable, a process for entering into an agreement with the Russian supplier has been initiated, and the quantity may go up during the current fiscal year," the company added.
Queries sent to spokespeople for JSW and JSPL remained unanswered. But executives at these companies said on condition of anonymity that Russia has been supplying coking coal for their domestic steel operations, and this arrangement would continue.
Russia is also providing technical help to Indian steel companies in making special steel that comes under the production-linked incentive (PLI) scheme for the sector. Memorandums of cooperation in technological collaboration to produce special steels, which is valid up to 2025, have been signed by SAIL, JSPL ,and JSW Steel with Russia’s TsNIIchermet I.P. Bardin.
For India, securing coal supplies to meet the needs of its growing power and steel sectors is critical as the two segments form critical elements of the strategic infrastructure space. India’s overall coal imports (coking and thermal coal) increased by 30% to 162.46 mt in FY23, according to a recent report by Mjunction, a business-to-business services provider. The import of coking coal in FY23 rose 5.44% to 54.46 mt from 51.65 mt in FY22, it said. The imports were largely from Australia. Small amounts were also imported from South Africa, Canada, and the US.
Imports of coking coal are expected to rise further as steel production is to increase further by over 10% from a level of about 122 mt in FY23.
While the government is pushing steel companies to diversify markets for imports of coking coal, it is also working on a strategy to reduce its dependence on overseas markets. A coking coal mission is planned in this regard.
Steps are also being taken to auction more coking coal blocks. Already, eight discontinued coking coal blocks are on the auction list, which will generate about 2 mt per annum each. Coal washeries are being upgraded to increase capacity, and nine new washeries are being set up. The government is targeting a production of about 140 mt of raw coking coal by 2030. Also, coal gasification and the subsequent use of syn gas in blast furnaces are also being examined.