SAIL imports one tonne of coking coal from Mongolia as it looks for alternatives to Australia
The state-run steelmaker will test the Mongolian sample for suitability in steelmaking as it seeks new sources of coking coal supply.
State-owned steel company SAIL has begun looking for new sources of coking coal supply. As part of this effort, the company has brought in a one-tonne sample of coking coal from Mongolia. It will now be tested to see how effective the coal is for making steel.
India meets about 95 per cent of its coking coal requirement through imports, with Australia accounting for a large share. Coking coal is a major part of the cost of making steel, so any change in its price or supply has a direct impact on the steel industry. This is why SAIL is looking at supply options from other countries besides Australia.
The quality of the Mongolian sample will be assessed. It will also be examined how useful it is in steelmaking and how much scope there is for commercial use. If the test results are good, the way could open for buying coking coal from Mongolia on a large scale.
However, bringing coal from Mongolia to India is not easy. Mongolia is a landlocked country, with China on one side and Russia on the other. Delivering coal from there to India is therefore a major logistical challenge. Instead of moving it through China, a long route through Russia may have to be taken, which is likely to raise transport costs.
An industry analysis says Mongolian coking coal is of good quality. Even so, quality alone will not decide India's final call. Transport costs, how workable the route is and how the supply will hold up over the long term will also be considered.
Steel production in the country is rising, so demand for coking coal is also likely to grow. The coal available within the country cannot meet the steel industry's entire requirement, so dependence on imports is likely to continue.
Along with Mongolia, India is also considering options to increase coking coal supply from countries such as Russia, Mozambique and the United States. The next decision will be taken only after the result of the test on SAIL's Mongolian sample comes in and the transport cost is studied.
