The Steel Ministry is looking to diversify its sourcing of coking coal, with Russia and Mongolia identified as key new markets, while plans are underway to establish the country’s own mechanism for determining coking coal prices and creating an index.
India, the world’s second-largest steelmaker, is the largest importer of coking coal. Australia accounts for 70 per cent of supplies.
After discussions with industry on Monday, it has been decided that trial runs for two shipments of coking coal from Mongolia — around 3 lakh tonnes — will be considered over the next three-to-six months, senior officials who took part in the meetings told businessline. The Trans–Siberian–Mongolian railwaywill be tapped.
Under consideration is the “one nation, one buying” of coking coal, on the lines of Japan and China. The industry is yet to come on board.
“Some points relate to securing coking coal by tapping new geographies, and determining the right price for coking coal. Tapping Mongolia for supplies and having own price mechanism are being considered for immediate implementation,” a person present in the meeting said.
Price Index
One point that came up was the need to have a “more realistic” price discovery mechanism for coking coal.
India does not have its price discovery mechanism and follows two global indexes — Platts and Argus. These two have been criticised as “subjective.” Another criticism is that liquidity in the spot market is as low as 4-6 per cent, and this small quantity determines the price, especially in India.
Deals between certain coal suppliers and their sister trading companies, or trader-to-trader bids and offers, get registered in the global indexes, thereby impacting the discovery mechanism, including spot prices.
As a result, coking coal prices were in the $150-170/tonne range in 2021 and 2022, shot up to the $350/tonne range in 2023. In 2024, prices have been hovering in the $250/tonne range. “We could look at a cost and freight approach in determining price instead of free-on-board price mechanisms,” an industry participant said.
The catch
At the meeting, it was also decided that Mongolia would be tapped for coking coal. A team comprising officials from the Ministry and industry representatives will soon visit the Central Asian nation to work out logistics and see if additional investments are required to be made there or not.
Mongolia is a landlocked nation and shares borders with China and Russia. India will seek alternative routes to China, including tapping the Vladivostock-Chennai route, to secure coal. “Any route through China has to be avoided,” said a source.
