Lured by discounts, Indian steelmakers lap up Russian coking coal | Mint

India’s purchases of coking coal – essential for steel production – from Russia have surged in recent months, as the sanctions-hit country sells the ingredient at a significant discount to other large suppliers.

Imports of coking coal from Russia have grown 53% year-on-year between January and August this year, making the country the third-largest supplier of the fuel, behind Australia and the United States, data from BigMint, a market intelligence firm, showed.

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A trade source said, requesting anonymity, that the largest buyers of Russian coking coal are JSW Steel and government-owned Steel Authority of India Ltd (Sail). JSW accounted for nearly half of the imports of Russian coal, while Sail accounted for 13% in the eight months through August.

On average, coking coal from Russia is available at a discount of 15-20% to other sources, according to BigMint. “However, with a steep decline of coking coal prices across the markets, discounts may change,” analysts at BigMint said in response to Mint’s queries.

“The lower cost of Russian coal is the key reason for buying from Russia,” said a senior industry executive on the condition of anonymity as trade with Russia is a geopolitically sensitive issue.

“Mills are changing their charge mixture to blend in a higher blend of coal from Russia to reduce cost,” this person said.

According to the BigMint data, India’s imports of Russian coking coal stood rose to 5.2 million tonnes during January to August 2024, from 3.4 million tonnes in the corresponding period last year.

Despite the recent spike, a further surge in imports of the fuel could be capped as Russian coking coal is of a relatively poor quality compared to Australian supplies and companies like Tata Steel avoid trade with Russia following its war with Ukraine.

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Australia continues to be the largest supplier of coking coal to India, accounting for more than half of the total inbound shipments of the fuel. However, the country continues to cede market share to Russia – which now commands a 12.6% share. The US accounts for about 14% of coking coal supplies to India.

Price volatility of Australian coal, higher discounts offered by Russia and alternative options from the US have quickly led to changes in the market share of the countries.

India continues to be one of the top coking coal importers worldwide, with imports of 41.3 million tonnes during the first eight months of this calendar year, an increase of 12% from the year-ago period.

Major Indian steel makers such as JSW Steel, SAIL and JSPL sought to increase their stocks of Russian coking coal during this period. The trade source cited earlier said that during January-August 2024, JSW imported 2.45 million tonnes of Russian coking coal, a 65% y-o-y rise while imports by Sail rose to 0.66 million tonnes, a 30% increase.

Tata Steel, on the other hand, continues to rely on supplies of the fuel from Australia, the biggest source of coking coal for India over the years, and the US, increasing its imports from the two countries by 19.8% and 27.4%, respectively. On the other hand, JSW Steel has reduced its imports of the feedstock from Australia and the US by 25.2% and 10%, respectively.

State-run Rashtriya Ispat Nigam Ltd has also reduced its dependence on Australian and American feedstock by 19.4% and 17.6%, respectively, even as Jindal Steel and Power Ltd seeks to substitute expensive coking coal with cheaper pulverized coal injection (PCI), a sort of high-quality thermal coal, from Russia in smaller quantities. Its imports from the country rose to 1.09 million tonnes. Imports from Australia for PCI coal for JSPL have reduced by 29.2% y-o-y to 0.09 million tonnes.

Six years ago, Australia accounted for 81% of the coal shipments to India, Russia had a 3% market share, and the US accounted for 8%, data from BigMint showed.

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In 2021, India’s Union cabinet approved a memorandum of understanding, allowing for an institutional mechanism between India and Russia on cooperation regarding coking coal that further boosted supplies.