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India’s steel sector faces mounting energy security risks as 90 per cent of its metallurgical coal is imported.
Further, 64 per cent of upcoming steel capacity is coal-based.
IEEFA warns that even with growing US supplies, India remains exposed to global price shocks, climate disruptions and freight constraints.
Experts highlight need to shift towards scrap-based electric arc furnace and green hydrogen steelmaking.
India’s steel sector remains dependent on imports for around 90 per cent of its metallurgical (met) coal needs, even as 64 per cent of upcoming capacity expansion is anchored in coal-based blast furnace routes, reinforcing long-term energy security risks, according to a new briefing note by the Institute for Energy Economics and Financial Analysis (IEEFA).
The report showed that diversification towards US coal supplies offers only limited relief in a globally interconnected and volatile market.
India’s target of reaching 300 million tonnes per annum (MTPA) of crude steel capacity by 2030 is set to drive a sharp increase in met coal demand. About 64 per cent of the 382 MTPA capacity under development relies on coal-intensive blast furnace (BF) technology.
At an average requirement of 770 kilogrammes of met coal per tonne of steel, the planned BF capacity alone could require an additional 140 MTPA of coal, nearly doubling current supply levels.
Despite policy efforts to boost domestic production, including “Mission Coking Coal”, India’s reserves remain largely unsuitable for steelmaking due to high ash content, leaving the country reliant on imports for about 90 per cent of its met coal needs.
The United States has emerged as India’s second-largest supplier of met coal, with its share rising from about 8 per cent in FY21 to roughly 15 per cent in FY25.
This shift is supported by recent India–US trade engagements aimed at strengthening cooperation in energy and industrial supply chains. India has indicated plans to expand purchases of US energy products as part of a broader procurement strategy, with the commerce and industry minister highlighting the need to reduce dependence on a few geographies and manage price volatility.
However, the report cautions that shifting suppliers does not shield India from global price volatility. Australia continues to dominate seaborne met coal exports, accounting for nearly half of global supply and acting as the key price setter.
In early 2026, flooding in Queensland disrupted mining operations and logistics, pushing benchmark premium hard coking coal prices to $252.5 per tonne (Rs 23,404 per tonne) on February 4 — an 18-month high and more than 50 per cent above March 2025 lows. US coal prices rose in tandem as buyers sought alternatives, underscoring the strong linkage between markets.
Climate-related disruptions are expected to intensify, further increasing supply risks and price volatility.
Logistical and structural factors continue to limit the competitiveness of US coal. Shipments from the US take 40-45 days to reach India, compared to 20-25 days from Australia, increasing freight costs and supply chain uncertainty. While US coal may be cheaper on a free-on-board basis, higher transportation costs often erode this advantage.
“Freight economics are a key factor. The longer distance for US cargoes means higher freight costs, now exacerbated by the West Asia crisis and the impact on shipping fuel,” said Simon Nicholas, global lead analyst (Steel) at IEEFA and co-author of the report.
US export capacity is also limited and expected to decline in the coming years, even as India’s demand continues to rise, reducing its potential as a long-term substitute for Australian supply.
Technical constraints add another layer of complexity. Indian steelmakers are increasingly adopting stamp-charging technology, which is optimised for blends of domestic and Australian coal, limiting the suitability of US-origin coal in many plants.
India’s met coal imports are projected to rise to 149 million tonnes by 2035 from about 94 million tonnes in 2026, according to S&P Global estimates cited in the report.
The findings come amid heightened global energy uncertainty linked to the US-Israel war on Iran, which has exposed vulnerabilities in fossil fuel supply chains and shipping routes.
IEEFA argued that reducing dependence on imported coal is essential for long-term energy security. It recommended accelerating scrap-based electric arc furnace steelmaking and scaling up green hydrogen-based production.
The authors of the report stressed that without a shift towards alternative technologies, diversification alone will not resolve the sector’s underlying energy security challenges.