India imports 85% of its coking coal and is set to dominate global coking coal demand for 2025. Here’s why, and what the government has planned to transform the sector.
Here’s an impressive statistic: India has one of the largest coal reserves in the world, standing at number 5 globally after the United States, Russia, Australia and China. As of April 1, 2023, India’s total estimated coal reserves are 378.21 billion tonnes, according to the National Coal Inventory 2023 by the Geological Survey of India, based on data from various organizations.
But here’s another interesting statistic: India is the largest importer of coking coal in the world. Coking coal is feedstock for the steel sector. India is the world’s second-biggest crude steel producer and imports about 85% of its annual coking coal consumption, roughly 70 million metric tons.
So why is such a coal-rich nation so dependent on imports? We’re here to explain.
Coal, coking coal, and coke
Coal exists in various forms, including brown coal, lignite, and anthracite. And coal is a versatile mineral: it is used far beyond energy generation and is vital in the production of iron, aluminium, paper, chemicals and steel. And India happens to be the second largest producer of steel in the world, after China. So as a raw material, coal is extremely important.
Coking coal or metallurgical coal, is a sedimentary rock that is used to produce coke, which is an essential ingredient in steelmaking. Coking coal has a unique caking ability, or, the ability to become flexible, melt together, and re-solidify into coke particles. Coke is produced by heating coking coal in a coke oven under a reducing environment. During this process, the coal softens, melts together, and re-solidifies into coke via the process of caking.
It is this coke (derived from coking coal) which is later used in steel production.The quality of coke depends on the characteristics of the coking coal and the operating conditions of the coke plant. So the better the coking coal, the better the coke, and the better it is for steel production.
However, despite having the fifth-largest reserves of coal in the world, India relies heavily on imports for coking coal.
Why does India import so much coking coal?
In a nutshell, India imports coking coal to fill the gap between demand and domestic supply, as well as to make up for the lack of quality in our existing domestic reserves, as explained below.
- Low-quality coking coal reserves: India has a fair amount of coking coal reserves. Statistics from the Ministry of Mines’ Indian Mineral Yearbook 2021 states that “Of the total resources, the share of prime-coking coal is 5.313 billion tonnes, medium-coking 28.08 billion tonnes and blendable/semicoking 1.708 billion tonnes.”
However, the quality of this coking coal is not conducive to producing good quality coke, since Indian coking coal has a high ash content.
Ash is simply the particles/residual matter left behind after coking coal is burned. Some forms of coking coal have a high ash content. The higher the ash content, the higher the ash yield; which means much more ash residue is left behind after the coking coal is combusted. This ash residue has to be disposed of after combustion, which is why in the steel industry, coking coal with low ash content is preferred.
- High levels of steel production: India is the second-largest producer of steel globally. And coking coal is an important raw material in steel production. Coal, turned into coke, is used to make roughly 70% of the steel in the world. Over the last 5 years, India has become the world’s second largest producer and consumer of steel, with steel production capacity increasing by approximately 29 million tonnes, touching 171.35 million tonnes in FY24 (up to February 24) from 142.24 million tonnes in FY19. Coking coal is the lifeblood of steel production, so to meet industry demand, imports are the only option for now.
Bridging the gap
Indian steel companies consume about 70 million metric tons of coking coal a year, with 85% of the need filled by imports, largely from Australia and Russia. Over the course of 2024, India’s imports increased, driven by higher steel production and the availability of discounted coking coal supplies from Russia (which led to reduced sourcing from Australia).
The Ministry of Coal is transparent about India’s coking coal imports, stating that:
Coking Coal is being imported by Steel Authority of India Limited (SAIL) and other Steel manufacturing units mainly to bridge the gap between the requirement and indigenous availability and to improve the quality.
For the period of April 2024-September 2024, India’s coking coal imports reached a six-year high of 29.6 million tonnes. Imports from Russia surged by over 200%, and overall shipments rose by about 3% compared to 28.8 million tonnes in the same period last year.
Demand has grown to such an extent that in October 2024, it was reported that India was looking to import coking coal from Mongolia by way of Russia, owing to Australian supply disruptions.
What’s next for India’s coal sector?
Economic growth and higher energy needs are driving increased coal demand overall. Production rose by 6.21% to 628.03 million tonnes between April-November FY24 compared to the same period in FY23. And thermal coal production is expected to grow by 8-10% due to rising electricity demand. Coking coal demand is also set to rise with expanded steel production capacity.
Keeping the growing demand in mind, the coal industry in India is undergoing a major shift. The government aims to strike a balance between economic growth and energy transition goals with some new key initiatives.
- Coal Exchange for market efficiency: India will launch its first coal exchange in 2025 to facilitate trading and price discovery, improving accessibility for industries.
- Focus on coal gasification: Investments in coal gasification aim to produce cleaner energy alternatives like synthetic natural gas and petrochemicals. The government has allocated ₹8,500 crore to incentivize such projects.
- Policy reforms: Revised mining policies ensure quicker operationalisation of coal blocks, with incentives for early production and penalties for delays.
As both industrial demand and output grow, these initiatives can help balance India’s energy needs with sustainability goals, ensuring a robust coal and steel sector for the future.