India is set to increase its coking coal imports from Russia, a crucial component in steel production. According to information provided by three government sources and an industry executive, this move comes in response to a decline in shipments from Australia, the primary supplier, and the challenges steel mills grappling with surging prices face.
The steel mills in India, the second-largest producer of crude steel globally, have been contending with inconsistent coking coal supplies from Australia, which traditionally constitutes over half of India’s annual imports of approximately 70 million tonnes. In the previous month, Australian coal prices surged by 50%, exceeding $350 per metric ton, attributed to maintenance disruptions, reduced supplies from Queensland, and a sluggish train network.
Despite assurances from Australia regarding a stable supply, India is actively seeking alternatives beyond Australia to diversify its import sources, as communicated by the government sources. In the preceding year, attempts by Indian steel mills to enhance coking coal shipments from Russia were hindered by stringent economic sanctions imposed on Moscow due to the conflict in Ukraine, impacting Russian coking coal supplies to Indian mills.
However, with improvements in payment mechanisms between Indian buyers and Russian suppliers, there is an anticipated boost in coking coal supplies to India’s steel mills, according to government and industry sources. Russian coking coal shipments are currently more economical than those from Australia, and some Russian suppliers are reportedly open to further price reductions.
One government source familiar with the matter stated, “Discounts and rupee payments have helped (Indian) companies to look at Russia as an alternative source.” Government-backed steel manufacturers in India, such as the Steel Authority of India (SAIL) and Rashtriya Ispat Nigam Ltd (RINL), have opted for rupee settlement for Russian coking coal, leveraging the advantageous currency for transactions.
SAIL, RINL, and the federal steel ministry have not responded to email inquiries seeking comments. SAIL’s chairman has indicated an expectation of four shipments, each comprising 75,000 tons of Russian coking coal, for the quarter ending December. In September, Russia’s major lenders, Sberbank and VTB announced efforts to enhance their ability to convert rupees into roubles, facilitating exporters in accessing funds that were previously constrained in India due to the non-convertibility of the rupee.