KEY POINTS
- Coking coal is a key material in steel manufacturing and makes up more than half of India's imports
- Australia normally accounts for more than half of India's annual imports of around 70 million tonnes
- Australian coking coal prices jumped 50% to over $350 a metric ton last month
The number of coking coal cargoes reaching India from Russia are rising, as the South Asian country explores alternatives to its top supplier Australia.
Coking coal is a key material in steel manufacturing and makes up more than half of India's imports. Australia normally takes credit for more than half of the country's annual imports of around 70 million tonnes. However, Australian coking coal prices jumped 50% to over $350 a metric ton last month, thus leading to spikes in production costs for steelmakers.
Indian steelmakers were now favoring imports from Russia, as Australian coking coal prices rose due to factors such as maintenance outages, lower than usual supplies from Queensland and a slower train network.
India is looking beyond Australia for coking coal imports, sources told Reuters. This comes despite Australia assuring India of a steady supply of the commodity earlier this month, with both sides acknowledging the shortages and surge in prices that India's steel mills are facing.
India sourced 70% of its 57 million tonne (MT) metallurgical coal imports from Australia in FY 2022, but, this year, the imports have dropped to 50% by November.
Despite the drop in imports from Australia, the country was still the highest seller to India's steel mills, while the U.S. was the second-largest seller. Russia surpassed Indonesia and Mozambique to come in at third place.
With Russia and India now having smoother payment mechanisms, the south Asian country can expect a spike in imports of the commodity from the former.
The sources told Reuters that Russian suppliers were willing to further reduce coking coal prices, which were already cheaper in comparison to Australia.
"Discounts and rupee payments have helped (Indian) companies to look at Russia as an alternative source," a government source told the outlet.
The enabling of payment in rupees is another factor that makes Russian coking coal more favorable.
India's government-backed steel manufacturers Steel Authority of India (SAIL) and Rashtriya Ispat Nigam Ltd have opted for rupee settlement for Russian coking coal, the sources noted.
Four shipments of 75,000 tons of Russian coking coal each are expected to reach SAIL's plants during the quarter ending December, according to its chairman.
"The (rupee) currency is an enabling factor for these companies," another government source said.
