India's SAIL flies in Mongolian coking coal as it seeks new supplies, sources say

NEW DELHI: Steel Authority of India (SAIL) has airlifted coking coal from Mongolia for the first time, testing the landlocked nation as a potential new supplier as India seeks to reduce its dependence on Australia, two sources said.

The state-backed steelmaker flew in a 1-metric-ton sample earlier this month and will assess whether the coal meets its steelmaking requirements, the sources said, declining to be identified because the development has not been made public.

SAIL, one of India’s largest steelmakers, planned the trial last year, in a move first reported by Reuters.

India, the world’s second-largest crude steel producer after China, imports about 95% of its coking coal needs, with Australia supplying at least half. Coking coal accounts for nearly 40% of steel production costs.

The trial is aimed primarily at diversifying supplies, though transporting coal from Mongolia to India remains a major challenge, the sources said.

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Logistics hurdles

Mongolia is landlocked between Russia and China, and strained relations between New Delhi and Beijing mean India would likely have to rely on a longer route through Russia.

Indian authorities have previously said they favour the Russian route because of strategic concerns involving China.

Relations between India and China have remained tense since a deadly clash along their disputed Himalayan border in 2020, despite recent steps to improve ties, including the resumption of direct flights and easier visa procedures for Chinese professionals.

SAIL will decide whether to pursue long-term supplies from Mongolia based on the suitability of the coal, and the cost and feasibility of transporting it, the sources said.

Shipping the coal via Russia would make it significantly more expensive than competing supplies, although its quality is superior, a metallurgical coal analyst said.

SAIL and Mongolia’s Ministry of Mining and Heavy Industry did not respond to requests for comment.

India and Mongolia agreed last year to work towards securing coking coal and copper supplies for Indian companies.

India’s coking coal imports are expected to rise 3% to 5% in 2026/27 from 64 million tons a year earlier, commodities consultancy BigMint has said, as domestic coal does not fully meet steelmakers’ requirements.

Australia is expected to remain India’s largest supplier, although imports from Russia, Mozambique and the US are also forecast to increase, analysts said.

As India expands steel production, it will require substantially more coking coal, most of which will need to be imported, increasing pressure on global supplies.

Indian steelmakers have raised prices in recent weeks as coking coal costs increased and domestic demand revived, Reuters reported earlier this month.