How can India become a price-setter from price-taker in global coking coal market?

• India is the biggest spot market for coking coal globally
• Any index totally based on Australia ignores India’s import diversification

For global coking coal suppliers India has already emerged as the key market which will lead growth in the coming years because India’s expanding BF-BOF-based steel production capacity will partly, if not entirely, offset the slow but inevitable decline of demand from China. India was the second-largest importer of metallurgical coal in CY’24 and depends on imports for 90-95% of its requirements.

Can India set a benchmark in global pricing?

Still, India is not a price-setter but a price follower in the seaborne import market. Why is this so? “A coking coal price index should be generic which has to have a normalisation of global trade to FOB Australia prices or CFR India because India has been buying over 55% of met coal from origins other than Australia.”

“So, we are seeing that the CFR India index has the potential to become the benchmark in global coking coal pricing,” said Puneet Jagatramka, Executive Vice President – Central Procurement Cell-OPEX & Bulk Raw Material, JSW Steel while speaking during a session at the Indian Steel Association’s (ISA) annual steel summit – ISA Steel Conclave.

China is no longer the spot market which it used to be for coking coal. It is the clearing market. India is the spot market today. India sources it coal from Australia but also a lot of it from the US, Canada, Mozambique, etc. So, any price index that entirely based on Australia can’t be wholly objective, said an expert.

CFR India index

“For the last one year, CFR China prices of the same rank and grade of coking coal from Australia have been at least $30 lower than CFR India. This differential pricing is hard to understand. There should be normalisation of CFR China, CFR India, including Canadian, Mongolian and US coal and everything should be netback to FOB Australia and also CFR India,” said Jagatramka.

Indian buyers of coking coal have already urged the price reporting agencies (PRAs) to come up with a consultation paper on indexation for coking coal. “India, today, is the price-maker in the coking coal market and the index has to reflect that,” added Jagatramka.