India aims to reduce its dependence on imports of met coal

Metallurgical coal demand for steelmaking exhibited a robust increase of 6% y-o-y, reaching 75 million tonnes (mnt) in CY'23 compared to 71 mnt in CY'22. Projections indicate a further surge in met coal demand to 82 mnt by CY'25.

In terms of consumption, metallurgical coal utilization in steelmaking witnessed a notable 7% y-o-y growth, totalling 76 mnt in CY'23. Given that India's dependence on imports is over 90%, increase in imports last year may appear to have been marginal.

Coal import scenario

India's imports of metallurgical coal in CY'23 stood at around 71 mnt as against 69 mnt in CY'22, an increase of 3% y-o-y, as per latest SteelMint data. Rise in imports has been marginal considering the steady growth in domestic crude steel and hot metal production.

Factors driving marginal rise in met coal imports-

Higher domestic production: Coal India Ltd., contributing over 80% of domestic coal production, recorded a significant 10% y-o-y growth in coking coal production, reaching approximately 59 mnt in CY'23. Some Indian integrated mills also boosted production from their overseas coking coal assets to reduce reliance on imports. However, limitations in domestic coal washing capacity hinder efforts to minimize import dependency.

Seaborne trade volumes : Australia's share in total Indian imports has declined from over 54% in CY'22 to 48% last year. The volume of the US and Canadian shipments increased y-o-y. Russian exports to India (mainly PCI) jumped 64% y-o-y. Premium coking coal prices rose by 60% in H2CY'23 and increasing volatility amid a narrow supply base impacted imports.

Higher PCI use to cut costs: PCI imports experienced an 8% uptick, reaching nearly 15 mnt in CY'23. Industry sources suggest that new blast furnaces are designed with additional capacity for PCI, with an expected PCI rate of approximately 200 kg/t of hot metal. This strategic increase in PCI usage serves as a vital cost reduction tool, contributing to a drop in the coke rate in blast furnace ironmaking and potentially minimising dependence on prime coking coal.

To reduce reliance on coking coal imports, a meeting chaired by the Additional Secretary (Coal), Ministry of Coal, is scheduled for 17 January 2024. The focus will be on addressing the anticipated Coal Demand in the Steel sector, analyzing the Coal import scenario, and understanding its implications on Coal import substitution to mitigate dependency. The Indian government's proactive measures, such as boosting global coking coal production and establishing local washeries, suggest a potential decline in India's coking coal imports in the upcoming years.