Indian steelmakers are experiencing significant pressure on their profit margins due to a substantial increase in coking coal prices during the first seven months of 2026, according to industry analysts and executives cited by Reuters. India's dependence on coking coal imports is nearly complete, with the nation relying on imports for approximately 95% of its total coking coal, also known as metallurgical coal, demand. Metallurgical coal is an essential raw material in steelmaking, characterized by higher carbon content, lower ash and moisture levels compared to thermal coal used for electricity generation.
Premium coking coal freight on board (FOB) prices from Australia increased by 25% in the first seven months of 2026 compared to the same period in the previous year, according to Banmeet Khurmi, metallurgical coal and coke market service lead at Sydney-based consultancy CRU. This significant price increase stems from multiple supply disruptions affecting global markets. The surge in coking coal prices is attributed to several factors including slower ramp-up of new mining operations, elevated prices resulting from geopolitical tensions including the Iran war, supply disruptions at major producer Australia, and a devastating coal mine explosion in China's Shanxi province that claimed more than 80 lives, marking the worst Chinese mining accident in recent years.
Mining giant BHP reported that steelmaking coal prices have strengthened from 2025 levels due to strong Indian import demand combined with supply disruptions that have tightened the seaborne market. The company noted in its Economic and Commodity Outlook released this week that these factors have significantly influenced global pricing dynamics. India has expanded its steelmaking capacity to approximately 220 million tonnes per annum (Mtpa) in the financial year 2026, representing a 10% increase year-on-year.
The country is targeting capacity expansion to 500 Mtpa by 2047, with much of this growth expected to be blast furnace-based production. However, industry analysts indicate that coking coal costs for Indian steelmakers are expected to remain elevated through at least the second half of 2026 due to ongoing supply losses from both China and Australia. A significant challenge for Indian steel producers is their inability to pass these elevated costs to customers due to competitive pressure from Chinese steelmakers.
This situation is effectively squeezing profit margins for Indian steelmakers while also delaying planned capacity expansion projects within the industry. Source: Reuters, BHP Economic and Commodity Outlook, CRU Group
Source: oilprice.com