Context:
Indian steelmakers face margin pressure as global coking coal prices rise amid supply disruptions in major producing countries. India, the world’s second-largest crude steel producer, imports about 95% of its coking coal requirement, making domestic steel production vulnerable to global price shocks.
Explanation
- Coking coal (metallurgical coal) is a high-quality coal used to manufacture coke, an essential input in conventional iron and steel production.
- In the Blast Furnace–Basic Oxygen Furnace (BF-BOF) route, coke acts mainly as a fuel and reducing agent, helping convert iron ore into molten iron.
- Coking coal differs from thermal coal, which is primarily used for electricity generation and industrial heating.
- India has substantial coal reserves but limited availability of high-grade coking coal, resulting in heavy import dependence.
- Australia has traditionally been India’s largest coking-coal supplier; Russia, the US and Mozambique are other sources.
- Coking coal forms a significant share of steel production costs; therefore, higher international prices and freight costs squeeze steelmakers’ margins.
- Diversifying imports and increasing domestic coking-coal production can improve raw-material security.
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