How will India meet its target of raising domestic coking coal blend to 30% by 2030?

*BF-intensive steel capacity expansion to trigger surge in demand

*Prime met coal reserves declining fast the world over

*Stamp charging coke batteries to boost domestic coal use

*Dependency on imports to persist in foreseeable future

India is set to emerge as the world's third-largest economy by 2030 and the country's steel demand is expected to grow at an annual rate of 7% in this decade. The country is likely to witness remarkable growth of 46% in steel production till 2030, with output expected to reach 210 million tonnes (mnt), as per SteelMint estimates.

BF-intensive growth

Of the approximately 80 mnt of steel production capacity to be added in India by 2030, 66% will be through the BF-BOF route, with nearly 90% of it projected to be operational till that date. In India's steel production map, the BOF and EAF routes contribute 46% and 54%, respectively.

However, by 2030, this ratio is expected to change to 56% for BOF and 43% for EAF-IF, resulting in 121 mnt of steel to be produced by the BF-BOF plants.

Coking coal demand

India's steel production growth via the BOF route, in view of the 140 mnt of hot metal output outlook in 2030, will require 117 mnt of metallurgical coal. The steel sector accounts for 80% of metallurgical coal demand, with the remaining 20% used in the production of sinter, pellets, ferroalloys, and in the casting/foundry industries.

By 2030, total metallurgical coal demand is projected to reach 117 mnt of which coking coal is expected to constitute about 88 mnt, while the rest will be PCI coals.

Increasing domestic blend

The only hurdle that can prevent India from attaining its steelmaking targets for 2030 is growing supply tightness of prime coking coal, sources point out. Both desired grades and total volumes may become increasingly insufficient.

In 2022, India's coking coal production stood at around 60 mnt but only 10-12% of this was washed and converted into coke, yielding about 4-5 mnt for use in steelmaking.

Indian coal is high in ash content. So, the bulk of the coking coal is imported, and there has been limited production of washed coal in the country. Notably, 80-85% of India's coking coal demand is currently met through imports.

To reduce this dependency, the government has come up with 'Mission Coking Coal' which envisages efforts to explore and mine domestic coking coal, set up washeries and allocate mines through auctions with the objective of achieving 140 mnt of raw coking coal production by 2030.

Currently, India uses domestic resources to meet only 10-12% of its coking coal requirement, but the government's plan is to increase this supply by 30% by 2030.

Technological intervention

The Ministry of Coal has projected that for producing 181 mnt of steel through the BF route by FY'30, as per National Steel Policy 2017, about 161 mnt of coking coal (with 10-11% ash content) would be required. Demand for domestic coking coal will depend on whether stamp charging technology for coke production is implemented in earnest.

Two separate scenarios have been presented by the Ministry of Coal. Assuming stamp charging technology is not in place, demand for raw coking coal and washed coking coal (assuming 33% yield) has been estimated by the government at 121 mnt and 40 mnt respectively.

However, assuming stamp charging technology is widely adopted, demand for raw coking coal and washed coking coal (pegging yield at around 33%) has been calculated at 170 mnt and 56 mnt respectively.

Therefore, coking coal washery capacity would be required to beneficiate approximately 121 mnt and 170 mnt of raw coking coal under both scenarios. So, there is reason to believe that implementation of stamp charging technology for coke production will gain momentum in the years to come in a bid to enhance usage of domestic coking coal.

Outlook

With the high ash content of its domestic coal, India's reliance on imports is absolute. The adoption of hydrogen-based technologies in India is still at an early stage constrained by limited green hydrogen supply. Replacing existing BF facilities is a slow and complex process, and the expected surge in hydrogen adoption in India is projected after 2035, subject to shifts in technology costs.

Assuming government production targets are met and planned washeries become operational, coal washing feed is projected to reach 40% by 2030. This, combined with an improved yield of 50%, would lead to domestic coal supplies meeting 30% of total demand, reducing import dependency to some extent.

However, in the base case scenario, with gradual growth in domestic coking coal production and minimal progress in coal washing, domestic sourcing is expected to increase to a maximum of 15%, necessitating imports of around 80 mnt by 2030, SteelMint expects.