Steel Authority of India Ltd. (SAIL) has airlifted a consignment of coking coal from Mongolia for the first time as the state-owned steelmaker evaluates the country as a potential new source of the key raw material, according to two sources familiar with the development.
SAIL flew in a one-metric-tonne sample from Mongolia earlier this month. The company will assess whether the coal meets the requirements of its steelmaking operations, the sources said. They declined to be identified because the development has not been made public.
The trial follows SAIL’s earlier plans to test Mongolian coking coal as India seeks to reduce its dependence on established suppliers, particularly Australia. The trial is primarily aimed at diversifying the supply base, although transporting coal from landlocked Mongolia to India remains a significant challenge.
India, the world’s second-largest crude steel producer after China, imports about 95% of its coking coal requirements. Australia accounts for at least half of those imports. Coking coal is a critical input for blast-furnace steelmaking and accounts for nearly 40% of steel production costs.
Mongolia is located between Russia and China, leaving Indian buyers with limited options for moving the coal to India. Given strained relations between India and China, the Russian route is likely to be considered for transporting Mongolian coal, although this would involve a substantially longer journey.
Indian authorities have previously indicated a preference for routing such supplies through Russia because of strategic concerns linked to transit through China. Relations between India and China have remained tense since the 2020 military clash along their disputed Himalayan border, despite some recent steps towards improving bilateral ties.
Logistics costs could, however, affect the commercial viability of Mongolian coal. Shipping the material through Russia would make it significantly more expensive than competing supplies, although Mongolian coal is considered to have superior quality, according to a metallurgical coal analyst cited in the report.
SAIL will decide whether to pursue longer-term supplies from Mongolia after evaluating the quality of the coal, as well as the cost and feasibility of transporting it to India. The outcome of the trial will therefore determine whether Mongolia can become a regular source for the steelmaker.
India has been working to diversify its coking coal supply chain as it expands domestic steel production. The country agreed with Mongolia last year to work towards securing coking coal and copper supplies for Indian companies.
The move also comes as global metallurgical coal trade faces changing supply patterns. Australia remains the largest exporter of metallurgical coal, while Mongolia has become an increasingly important supplier to China. India is seeking additional sources as it prepares for higher steel production and remains heavily dependent on imported coking coal.
SAIL and Mongolia’s Ministry of Mining and Heavy Industry did not respond to requests for comment on the trial shipment.
