Premium hard coking coal prices jumped 25 per cent from last year to
average $236 per metric tonne freight on board (FOB) Australia in the first seven months of 2026.
| Photo Credit:
BHAWIKA CHHABRA
Indian steel mills are facing
mounting pressure on margins as higher coking coal prices,
driven by supply disruptions in Australia and China and the Iran
war, raise steelmaking costs, executives and analysts said.
India, the world’s biggest crude steel producer after China,
meets 95 per cent of its coking coal needs through imports, with at
least half shipped from Australia. Coking coal accounts for
nearly 40 per cent of steel production costs.
Squeezed margins could impede investment and delay capacity
expansion as Indian steelmakers step up spending to meet buoyant
domestic demand driven by infrastructure and strong economic
growth.
Premium hard coking coal prices jumped 25 per cent from last year to
average $236 per metric tonne freight on board (FOB) Australia in
the first seven months of 2026, said Banmeet Khurmi, lead,
metallurgical coal and coke market service, at consultancy CRU
in Sydney.
“Prices have been higher this year due to supply disruptions
in Australia, slower-than-expected ramp-up at new mines, price
support from the conflict in the Middle East and, more recently,
a large accident in Shanxi, China,” Khurmi said.
Costs are likely to remain high in the second half of the
year, partly due to the loss of supply following the Shanxi coal
mine disaster, said Freddie Brooks, commodities analyst at BMI,
a unit of Fitch Solutions.
For blast furnace-based steelmakers, every $10 a ton
increase in coking coal prices adds approximately $7 to $9 per
metric tonne to steelmaking costs, said an executive at a large
steel mill, who was not authorised to speak to the media.
Higher coking coal prices have squeezed margins, three other
executives at leading steelmakers said, with little headroom to
raise steel prices, given competition from cheap Chinese steel.
Shipments from China have increased despite import tariffs
on some grades.
Import demand grows
Coking coal imports are expected to rise by between 2
million and 3 million tonnes in 2026-27 from 64 million tonnes a
year earlier, commodities consultancy BigMint said.
With the higher demand for imports, comes higher transport
costs, partly due to disruptions from the US-Iran war.
“Trade flows have tightened with high demand from India and
higher diesel, freight and insurance costs,” said Hui Ting Sim,
vice president at Moody’s Ratings.
Australia is expected to continue meeting at least half of
India’s coking coal needs, although imports from Russia,
Mozambique and the United States are also set to rise.
Discounts on Russian coal, which accounted for 24 per cent of
India’s coking coal imports in recent years, have diminished
over the past two years, Khurmi said.
“Over the longer term, we expect Mozambique to overtake the
United States and Russia as the second largest exporter of
coking coal to India after Australia,” Brooks said, adding that
Indian companies such as state-run Steel Authority of India
and JSW Steel were turning to Mozambique for
supplies.
India has been seeking to diversify its coking coal imports
and gain access to Mongolia although experts say this remains
difficult because of logistical challenges.
Published on August 19, 2026
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