India has emerged as the world’s largest importer of coking coal in CY’21, overtaking China.
Strong global demand and tight supply drove coking coal prices to extremely high levels in late-Sept’21, which persisted for majority of the second half of the year.
However, Indian coking coal imports increased by 7% y-o-y to 56.27 million tonnes (mn t) in CY’21 against 52.41 mn t in CY’20, on the back of higher crude steel production.
On the other hand, its nearest competitor China saw a steep decline in imports by 29% y-o-y to 51.5 mn t in CY’21, as the country had placed severe steel output cuts in a desperate measure to curb air pollution.
Higher steel production
Coking coal is primarily used for steelmaking and its application in context to India is vital to fuel the annual steel capacity of 145 mn t. But, the country heavily relies on imports to meet its demand in view of the limited domestic reserves.
It is important to note that country’s largest coal miner Coal India Ltd (CIL) produced 617.16 mn t in CY’21, of which, coking coal output was 41.76 mn t, accounting a mere 7%.
Demand for imports was more pronounced this year as the nation’s manufacturing and construction activities picked up, thus contributing to rising steel demand.
Notably, crude steel production rose by nearly 18% y-o-y to 105.29 mn t during Jan-Nov’21 following rapid expansion in industrial activity.
Rising coke exports
Following the production cuts in China, there was an acute shortage of metallurgical coke in the global market and Indian players were on hand to capatilise. Incidentally, Indian met coke exports registered an 11-fold increase to 1.01 million tonnes (mn t) in CY’21 compared with 88,715 t in CY’20.
Metallurgical coke, basically produced from coking coal in coke ovens, is fed as one of the raw materials in blast furnace for steelmaking.
In India, majority of the coke is produced by primary players viz-SAIL, JSW Steel, Tata Steel for captive usage. However, a part of it is also produced for commercial purpose.
Consequently, amidst higher price realisation in the exports market, there was a renewed interest for met coke production which compelled domestic manufacturers to raise their coking coal sourcing.
In fact, the major met coke exporters had recorded a y-o-y increase in coking coal imports, with Bengal Energy topping the list.
Major Coking coal importers (including steel mills)
Source: CoalMint | Quantity in mn t
Dependency on Australia continues
With the Chinese government placing an informal restriction on Australian coal, India -the second largest steel producer in the world, became a key destination.
India imported 45.06 mn t of coking coal from Australia in CY’21, a 19% y-o-y increase against 37.71 mn t in CY’20.
Notably, almost 80% of India’s total coking coal imports (in CY’21) came from Australia.
Source: CoalMint | Quantity in mn t
However, the Chinese restriction has negatively impacted coking coal exports from other major countries to India which fell on the yearly basis during CY’21, reflecting their redirection to China.
Going forward, the recent growth in India’s coking coal imports is likely to continue, given the pressure to expand steel output. But, rising dependency on Australia remains a concern for the Indian steelmakers amidst risk involving weather or logistics disruptions that could lead to a further spike in seaborne prices.
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