Economy
India to use Russian rail to bring Mongolian coking coal to Vladivostok
Summary
- As part of its plans to ink coking coal import contracts with Mongolia, India is working out supply routes from the landlocked country; with plans to leverage the Russian Trans-Siberian Railways to bring coal to port city of Vladivostok and then deliver it to Chennai port.
As part of its plans to ink long-term coking coal import contracts with Mongolia to meet the needs of domestic steelmakers, India is working out supply routes from the landlocked country, with plans to leverage the Russian Trans-Siberian Railways to bring coal to port city of Vladivostok and then ship it to India, and deliver coal at Chennai port.
Government is also developing Estern Maritime Corridor linking eastern ports of India to Russian port in Vladivostok.
This route will help avoid ports in China that though cheaper are not a strategically viable option. Mongolia already has rail connectivity with both China and Russia.
According to two people aware of the development, the logistics to bring Mongolian coking coal would be finalized soon before Indian steel companies including state-run Steel Authority of India (SAIL) sign long-term coking coal supplies from the Asian country.
“We will like to make another delegation-level visit comprising officials of steel ministry and private and public sector steel makers to Mongolia to finalize the logistics and then negotiate long term supply deals as has been worked out between Mongolia and China. This would be the first instance of India getting the fuel for its steel companies from a central Asian country," said the first person quoted above.
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The second person said that if deals go through, and the economics works well, India could expect to get almost 10-12 mt or more of coking coal from Mongolia in FY26. The quantity would go up subsequently, the person added.
Coking coal is a key steel-making raw material and India, the world’s second largest crude steel producer, is amongst the largest importers of the feedstock after China.
According to the ministry if steel, India imported about 58 million tonnes of coking coal for its steel industry in FY24 (54 mt in FY23) with more than half (35 mt) coming Australia. The other suppliers include the US, Canada, Mozambique and Russia.
With sanctions on Russia, coking coal is coming at attractive prices to India and imports from that country have seen a rise for the past couple of year standing at 6 mt in FY24, increasing from about 2.5 mt in FY23.
Also Read: Lured by discounts, Indian steelmakers lap up Russian coking coal
The government is now looking to diversify its sources of coking coal imports to reduce heavy dependence on Australia as any disturbance in that market causes prices to spike and supplies to get restricted impacting domestic steel making. Also, Russian supplies have an element of risk, amid sanctions, bottlenecks in logistics infrastructure and export tariffs in that country.
India consumed 70 mt of coking coal in FY24
According to official data, India consumed 70 mt of coking coal in FY24 and its requirement is expected to rise to 75 mt in FY25 and see an exponential growth thereafter as India aspires to become a 300 mt steel producer by 2030, with coking coal imports projected to rise to around 110-120 mt.
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Mongolia is emerging as an ideal destination for getting fuel for country’s steel companies. Low-ash Mongolian coal is also low in sulphur and phosphorous making it a perfect choice for steelmakers.
“If logistics for supplies are established and delivered price of coal, even after longer transportation, is attractive and in line with global benchmarks, Mongolia could become a major feeder of fuel for steel companies. Our experience on trail use of Mongolian coal for steel making has been has been fairly good and if government can help get us good deals, it would work to the advantage of the industry," said an official of a domestic steel company involved in using Mongolian coming coal in test runs . The official asked to remain anonymous.
Queries sent to the ministry of steel, which also administers working of the Steel Authority of India Ltd (SAIL), remained unanswered till press time.
Mongolian coal has found favour with India since the past few years and this interest rose after 2021 when a delegation from the central Asian country met with officials of steel ministry and asked india to look at getting hard coking coal supplies from there. A delegation of the steel ministry also visited Mongolia earlier that created ground for Indian steel companies testing the market for meeting their fuel needs.
Officials of the ministry said that JSW Steel is expected to receive around 30,000 tonne of coking coal from Mongolia and SAIL is likely to get 3,000-5,000 tonnes as part of a trial run this year. For JSW Steel, this would be the second such shipment after 2021, when the company bought 8,000 tonne of coking coal from Mongolia.
Going forward Mongolian coking coal imports may account for as much as a fifth of India’s total coking coal imports. The G2G negotiations are part of India’s strategy to diversify imports to reduce over reliance on Australia, and make a play in China’s backyard.
