Indian Steel Mills Face Margin Pressure as Coking Coal Prices Rise

Indian steelmakers are facing renewed pressure on profitability as global coking coal prices climb, adding to production costs at a time when mills have limited room to increase steel prices.

Premium hard coking coal prices averaged around $236 per tonne on a free-on-board basis in Australia during the first seven months of 2026, up about 25% from the previous year, according to industry estimates cited by Reuters.

The increase has been driven by supply disruptions in Australia and China, slower-than-expected production from new mines and geopolitical tensions. A major coal mine accident in Shanxi, China, has added another layer of uncertainty to supply availability.

For Indian steel producers, the impact is significant because the country depends heavily on overseas supplies. Around 95% of India’s coking coal requirements are met through imports, with Australia accounting for at least half of those shipments.

Coking coal is a critical input for blast furnace-based steel production and accounts for nearly 40% of overall steelmaking costs. Industry estimates suggest that every $10 per tonne increase in coking coal prices can raise steel production costs by approximately $7 to $9 per tonne.

The higher input costs are already putting pressure on margins, particularly because steelmakers have limited pricing power. Competition from lower-priced Chinese steel has made it difficult for Indian producers to fully pass on higher raw material costs to customers.

At the same time, India’s requirement for imported coking coal is expected to increase. Industry estimates indicate that imports could rise by 2 million to 3 million tonnes in the 2026–27 financial year from around 64 million tonnes in the previous year.

Indian steel companies are also looking to diversify their sourcing. While Australia is expected to remain the largest supplier, imports from Mozambique, the United States and other markets are likely to gain importance.

State-owned Steel Authority of India and JSW Steel are among the companies exploring supplies from Mozambique, while India is also seeking greater access to Mongolian coking coal. However, logistical challenges could make diversification more difficult.

The immediate concern for steelmakers is whether higher coal and freight costs can be absorbed without weakening profitability or slowing investment. With infrastructure-led steel demand remaining strong, producers are expected to balance capacity expansion plans with tighter cost management.

For the Indian steel industry, the direction of coking coal prices will therefore remain an important factor for margins, pricing decisions and future investment.