New Delhi: India’s rapidly expanding steel sector faces mounting energy security risks as strains emerge in Australia’s metallurgical coal supply, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).
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India imports nearly 90 percent of its met coal requirements, with Australia accounting for the bulk of supply. IEEFA’s report highlights that “India has taken steps to strengthen its energy security, but more action is needed to avoid the risks clouding its fast-expanding steel sector,” noting that the country’s dependence on imports continues to grow with the expansion of blast furnace-basic oxygen furnace (BF-BOF) capacity.
The report warns that as India pushes toward its target of 300 million tonnes per annum (mtpa) of crude steel by 2030 — much of it through blast furnaces — the reliance on imported met coal will intensify because “the great majority of India’s domestic met coal does not meet the quality requirements of steelmakers due to high ash content and sulphur levels.”
IEEFA identifies a series of deepening risks in Australia — the world’s largest exporter of met coal — including declining investment in new mines, rising methane-related scrutiny, and legal and regulatory challenges.
Simon Nicholas, Lead Analyst, Global Steel, at IEEFA, said, “Key risks include growing concern about the methane emissions associated with Australian met coal mining and legal challenges. Coal mine capacity expansions are now being successfully challenged in Australian courts on climate and emissions grounds.”
The IEEFA report reinforces these concerns, stating that “the Australian met coal sector is characterised by numerous risks that could result in future supply disappointing Indian steelmakers.”
IEEFA also notes that the Australian government has “a clear track record of over-estimating its met coal export forecasts,” with projections revised downward for six consecutive years.
The report warns that methane-related pressures are escalating: “It seems highly likely that Australian coal mine methane emissions are significantly under-reported,” and that achieving Australia’s methane reduction targets will “make opening new mine capacity even harder in the long term.”
Nicholas added, “India has a 2070 net-zero emissions target, but is reliant on met coal imports from a country that has a 2050 target and will need to take emissions reduction actions sooner.”
IEEFA’s analysis highlights that Australian banks are tightening financing rules for met coal, and some have stopped supporting greenfield mines altogether. According to the report, “policies will tighten across financial institutions, echoing the withdrawal of support seen in the thermal coal sector.”
Mining economics are also deteriorating. The report notes that “unit costs have risen as much as 50 percent since 2018” across Queensland’s met coal operations, adding that “the cheaply available coal has been mined already and mining operations are having to dig deeper to maintain production, incurring higher costs.”
These trends, IEEFA warns, imply that future Indian import prices may rise structurally, “Any potential future shortfall in Australian met coal production could lead to higher prices… meaning that any price rises could become structural.”
Climate-related disruptions, particularly intensified rainfall and flooding in Queensland, are also affecting mining and rail logistics. The report cautions that “increased intensity of rainfall events in Australia’s key met coal exporting state raises the risk of more frequent supply interruptions and price spikes.”
IEEFA warns that if India continues expanding BF-BOF capacity, “a global shortfall could drive significant and structural price increases” in met coal.
Saumya Nautiyal, Energy Finance Analyst, Steel at IEEFA, said in the media release, “The combination of scrap-based electric arc furnaces (EAF) expansion, green hydrogen-based steelmaking, and policy incentives for low-carbon technologies could gradually reduce India’s reliance on imported met coal.”
The report calls for scrap steel and green hydrogen to be elevated as strategic resources, noting that scrap can “reduce India’s requirement for import of both met coal and iron ore in the long-term,” while domestic green hydrogen “represents a major energy security opportunity for India.”
Nautiyal added: “In doing so, India would not only enhance its energy security but also strengthen its competitiveness in global low-carbon steel markets.”
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IEEFA concludes that India must accelerate the shift toward cleaner steelmaking technologies, warning that relying on Australia’s met coal poses escalating risks across supply, price, climate exposure and financing.
“These shifts represent the next stage of India’s energy and industrial transition,” the media statement notes.
