India's Coking Coal Dependency: The West Asia War Freight Shock, What It Costs Steel, and Why DRI and EAF Is the Structural Hedge
India brings in about 60 to 65 million tonnes of coking coal each year, plus extra volumes of PCI coal and metallurgical coke. This covers roughly 90 percent of the country's metallurgical coal needs, with domestic coal continuing to play a modest blending role. Following the escalation of the West Asia War in early 2026, several major shipping companies had to pause or redirect their Suez routes around the Cape of Good Hope. At the same time, war risk insurance and bunker costs jumped across the entire region, creating effects that reached global freight markets far more broadly than they reshaped the specific direct route between Australia and India. Since coking coal remains one of the largest expenses in blast furnace steelmaking, finding alternatives is vital. Shifting to natural gas based DRI and EAF setups completely removes coking coal from the feedstock mix, trading it for a gas exposure that is more diversified and features a domestic supply option that coking coal largely lacks, though it is certainly not free of commodity or geopolitical risks itself.
Key Takeaways
- India has very limited domestic coking coal of blast furnace quality. Its main reserves, located in the Jharia and Bokaro coalfields of Jharkhand, are estimated at roughly 5 to 8 million tonnes per year of washed coking coal production. This is tiny compared to a total metallurgical coal requirement that is several multiples larger. Industry and government estimates generally put India's import dependency for coking coal at around 90 percent, not exactly 100 percent, since domestic coal plays a real but marginal blending role. India imported roughly 60 to 65 million tonnes of coking coal in calendar year 2025, plus additional volumes of PCI coal and metallurgical coke. These imports were sourced mainly from Australia, followed by the USA, Canada, Russia, and smaller volumes from Mozambique and a few other places.
- A significant Middle East escalation is widely reported to have begun in late February 2026, with some reports citing February 28 specifically. This followed strikes on Iran that were associated with disruption to shipping around the Strait of Hormuz and reports of some carriers suspending or rerouting Suez transiting services via the Cape of Good Hope, adding an estimated 10 to 15 days of voyage time on affected Asia to Europe routes. This is a real, ongoing situation as of this article's publication, and its effects on freight rates, war risk insurance, and bunker costs have been widely reported by the shipping and commodity trade press. Its effect on specific Australia to India coking coal routings, which do not transit the Suez, is best understood as indirect. It caused tighter global vessel availability, higher war risk premiums across the wider region, and elevated bunker fuel costs, rather than a direct rerouting of the voyage itself.
- Coking coal prices have moved in both directions, not just one, since the escalation began. Dated benchmark reports from places like Kallanish and Trading Economics put premium hard coking coal FOB Australia in the roughly $210 to $240 per tonne area at points during Q1 and Q2 of 2026. These week to week swings were tied to Chinese domestic mine supply, restocking cycles, and shifting sentiment about the conflict, rather than a clean, one way freight driven spike. Any delivered cost figure quoted for coking coal into India should be sourced to a specific dated benchmark and treated as a snapshot of a fast moving market, not a perfectly stable planning number.
- Coking coal is consistently one of the largest raw material cost components in traditional steelmaking, though its exact share of variable operating cost is model dependent. It moves with the coking coal price, exchange rate, and the specific cost model used, so published estimates vary accordingly. Precise rupee per tonne figures should be sourced from a live cost model on the day they are needed rather than treated as fixed.
- Natural gas DRI and EAF setups remove coking coal specifically from the feedstock mix, substituting a natural gas requirement instead. This offers a genuine diversification benefit. India has some domestic gas production, like KG D6, ONGC, and CBM or shale prospects, alongside LNG imports from a broader set of countries than coking coal's supplier base. It is not, however, a route to zero commodity exposure. LNG markets are themselves globally traded and were also affected by the same regional tensions, since Qatar is a major LNG supplier whose exports transit the Strait of Hormuz. The comparison is best framed as a more diversified and partially domestic exposure, not an absolute lack of exposure.
- India's steel industry has pursued coking coal supply diversification for years. This includes long term agreements with Australian, US, Canadian, Mozambican, and Russian suppliers, as well as the growing use of Indonesian semi hard coking coal as a blend component. This reduces concentration risk but does not eliminate import dependency. A shift to natural gas or, in the longer term, hydrogen based DRI changes the nature of the commodity exposure rather than eliminating it altogether.
Analysis, strategic interpretation, not a sourced fact claim
Coking coal's dominance of India's blast furnace steelmaking cost structure predates the West Asia War by decades, as it is a structural feature of the route, not a new development. What the war has done is add a further layer of cost and supply chain uncertainty on top of an already large exposure. This happens through tighter vessel availability, higher war risk insurance, and elevated bunker fuel costs across the wider region, even where the direct Australia to India coking coal route does not itself transit Suez or Hormuz. For Indian steel CFOs already tracking CBAM as a major external risk to their competitiveness, the war adds a second, largely independent source of cost pressure that runs through raw materials and shipping rather than export carbon costs, and the two risks are not correlated with each other, even though they compound.
The more durable lesson from the war, arguably, is not any single price level observed during 2026 but the demonstration that coking coal costs can move sharply and with little warning in response to events with no connection to steel markets at all. It also shows that Indian producers have relatively few deep, liquid long dated hedging options for that exposure, given limited long dated coking coal futures activity and near total reliance on imports. Natural gas DRI and EAF offers a different, and on balance more diversified, set of hedging options. These include domestic gas production, LNG supply from a broader set of countries, longer term contracting structures common in gas markets, and, over the medium term, the option to substitute green hydrogen from captive renewables. Once built, this setup is exposed to neither commodity markets nor shipping lane risk. This is a great reason to weight the DRI and EAF route more heavily in long term planning, rather than a claim that the route is completely immune to raw material risk.
BF and BOF Feedstock Risk Profile
DRI and EAF Feedstock Risk Profile
The supply diversification efforts and their limits
| Source Country | Directional Role | Shipping Route Exposure | Long Term Reliability |
|---|---|---|---|
| Australia | Largest single source (majority share) | Indian Ocean route to India, which does not transit Suez, but is affected by wider vessel and insurance market tightness | Stable, established supplier, but concentrated |
| USA (Appalachian) | Meaningful and growing minority share | Longer Atlantic and Pacific routing, generally having lower direct West Asia War exposure than Suez transiting trade | Competitive on quality, though there is exposure to US export logistics |
| Canada | Smaller minority share | Pacific routing, meaning limited direct Suez or Hormuz exposure | Long term supply relationships, reliable quality |
| Mozambique | Smaller, growing share | Direct Indian Ocean route, giving it low direct war exposure | Production still scaling, infrastructure constraints |
| Russia | Smaller share, used opportunistically | Direct Indian Ocean and Bay of Bengal routing | Sanctions and counterparty risk for buyers with Western exposure, variable quality |
| Indonesia | Small, blend grade share | Short regional transit | Semi hard coking coal, useful as a blend component rather than a primary charge |
Note: this table gives a directional, qualitative reading only. Actual country shares shift month to month, so for current figures, consult BigMint, Argus, or S&P Global Platts trade data directly rather than this table.
Why India's domestic coking coal development is not a near term substitute for imports, despite Jharia and Bokaro reserves.
India's Jharia coalfield in Jharkhand holds the country's principal coking coal reserves, but the remaining higher grade seams are deep, prone to methane risk and spontaneous combustion, and located in areas where long running underground mine fires have damaged surface infrastructure. State run Bharat Coking Coal Ltd continues to operate at Jharia amid ongoing safety and productivity challenges, and the associated fire mitigation and resettlement effort has been underway for two decades with limited completion. Domestic washed coking coal production is generally cited in the range of 5 to 8 million tonnes a year, which is just a modest blending contribution against import volumes several multiples larger. Treating Jharia as a near term substitute for imported coking coal is not a realistic planning assumption for a 10 year capital investment horizon. The more defensible reading is that domestic production will remain a supplementary blend source, not a route to import substitution at scale.
Frequently Asked Questions
Can Indian steel companies lock in coking coal prices to avoid freight and commodity volatility?
Only partially. Large Indian steel producers typically combine long term supply agreements with Australian and other overseas suppliers alongside spot purchases. These contracted volumes are commonly repriced against quarterly benchmark indices rather than fixed for the life of the contract. That quarterly repricing means even long term contracted tonnage is still exposed to market swings roughly every three months, meaning there are few deep, liquid long dated hedging options against a shock of the kind seen during the West Asia War. The most durable hedge against coking coal price and supply risk specifically is reducing reliance on coking coal in the production route, which is exactly what the DRI and EAF pathway does.
At what point does natural gas DRI and EAF become cheaper than traditional blast furnaces on a pure operating cost basis?
This crossover depends on the prevailing coking coal price and the prevailing domestic gas or LNG price simultaneously, and both have moved substantially over the past few years, so any single crossover number quickly goes stale. As a general rule, higher coking coal prices and freight costs narrow or close the historical cost advantage traditional steelmaking has held over the DRI and EAF route, while cheap, reliably available domestic gas widens the advantage further. When CBAM's carbon cost is added on top for EU facing production, the total cost of ownership comparison shifts further in favour of DRI and EAF. Producers modelling this decision should use current coal and gas price quotes rather than a fixed historical figure.
Is there any Indian domestic coking coal that can substitute for imports at industrial scale?
Only to a limited extent. India produces an estimated 5 to 8 million tonnes a year of washed coking coal, mainly from the Jharia and Bokaro coalfields, against import volumes several multiples larger. Industry estimates note a roughly 90 percent import dependency overall for metallurgical coal. Domestic coal also tends to be lower quality, featuring lower fluidity and higher ash, and is typically blended with imported coal rather than substituted for it directly. Closing this gap through domestic development alone is not considered realistic within a 10 to 15 year horizon by most industry analysts, given the geological and safety constraints at India's remaining reserves. This is the underlying reason alternative production routes are treated as a structural rather than purely economic alternative.
Sources
- Ministry of Coal, Government of India, coking coal production and import data
- Ministry of Steel, Government of India, raw material profile of the Indian steel industry
- BigMint, Argus Media, and S&P Global Platts, coking coal trade flows and benchmark pricing
- Kpler and Flexport market updates, West Asia War shipping and freight disruption, February and April 2026
- Bharat Coking Coal Ltd (BCCL), Jharia coalfield development and fire mitigation status
Related Reclimatize.in Research
DRI and EAF Economics, The Natural Gas Bridge to Hydrogen Scrap EAF vs Traditional Blast Furnaces, The Reline Retire Retool Decision CBAM and Indian Steel, What the Carbon Levy Actually Costs The Hormuz Choke, What the West Asia War Is Doing to India's Five Industries India's Blast Furnace Fleet, Age Profile and Stranded Asset Risk