India’s interest in Mongolian coking coal has intensified as steelmakers confront rising demand and continued dependence on Australian supply. But early optimism in New Delhi is quickly colliding with a reality that mining executives have long understood: Mongolia may have the right coal, but China controls the road out.
India imported more than 70 million tonnes of coking coal in FY2023–24, official data shows, and more than half of that came from Australia. With domestic steel production expanding on the back of infrastructure, construction, and automotive growth, mill operators warn that relying so heavily on one supplier leaves the sector exposed to unexpected price shocks, weather disruptions, and port bottlenecks. That’s why Mongolian coking coal, known for its strong CSR and blending properties, is receiving renewed attention inside India’s steel corridors.
Several Indian mills — including the state-run Steel Authority of India Limited (SAIL) — have held exploratory discussions with Mongolian producers. But officials familiar with those talks say the same issue keeps coming up: Mongolia is landlocked, and nearly all of its coal exports must pass through China. That single fact is shaping the entire feasibility debate.
China Controls Mongolia’s Only Practical Exit Route
For all its geological advantages, Mongolia’s coal industry operates with an unavoidable constraint. Trucks and trains carrying Mongolian coking coal head south toward the Gashuunsukhait–Ganqimaodu border crossing, where they merge into China’s infrastructure and, ultimately, China’s ports. Roughly 90% of Mongolia’s coal exports flow this way, according to Mongolian Customs.
To India’s steel producers, the problem is not the terrain — it’s the politics.
A Shorter Route, but a Strategic Vulnerability
Sending Mongolian coal to India through China would deliver the lowest logistical cost. The material could move to Tianjin or another northern Chinese port and then ship into India. But Indian officials say such dependence amounts to placing a critical industrial input under Beijing’s discretionary control.
China has previously slowed border crossings during domestic demand spikes or COVID-era restrictions, demonstrating its ability to throttle Mongolian exports overnight. That unpredictability is precisely what India wants to avoid in its raw-material supply chain.
“We cannot diversify our supply base by creating a new dependency,” one senior steel-sector official said, requesting anonymity because negotiations are ongoing.
Russia Route: A Longer Detour With Its Own Costs
The alternative is a northern corridor: moving Mongolian coking coal by rail into Russia and onward to far eastern ports like Vladivostok. While this avoids Chinese territory, the commercial challenges are substantial.
- Rail congestion remains high, as Russia continues redirecting exports toward Asian markets.
- Freight costs spike, especially on the Baikal–Amur Mainline, where demand outstrips capacity.
- Sanctions complicate payments, insurance, and vessel contracting for Indian companies.
The added distance and handling charges can inflate delivered cost by $10–$20 per tonne — enough to erase Mongolia’s pricing advantage over Australian premium hard coking coal.
For Indian mills already working with tight margins and long-term contracts, this makes the Russian route viable only if China remains completely closed.
SAIL’s Trial Shipment: Announced but Still Delayed
SAIL had previously signaled plans to import a small trial cargo of Mongolian coking coal to evaluate quality and blending suitability. Months later, no shipment has moved.
SAIL says it remains “engaged with Mongolian suppliers” but continues to assess “operational and commercial feasibility.” People familiar with the process say routing remains the biggest unresolved issue, with no clear agreement on whether the cargo would move through China, Russia, or a negotiated hybrid route.
Private steelmakers are watching closely. “If SAIL can get even one trial shipment done, it gives everyone more confidence,” one procurement manager said. “But the corridor politics are the real test, not the coal quality.”
Why Mongolian Coking Coal Still Matters for India’s Steel Plans
India’s steel capacity expansions — particularly blast furnace additions by JSW Steel, Tata Steel, and state-owned mills — will drive coking coal demand higher through 2030. Ratings agencies ICRA and CRISIL estimate India’s annual coking coal import bill could reach $18–20 billion before the decade ends.
For large steelmakers, even small alternative supply streams can reduce concentration risk or provide leverage in price negotiations with Australian exporters. That’s why Mongolian coking coal remains attractive: not to replace Australia, but to supplement it.
Previous Skillings coverage has explored similar diversification efforts, including India’s increasing interest in Russian and U.S. low-volatile coals.
Skillings Analysis
- “Mongolian coking coal offers India quality and diversification, but without a stable corridor, it remains an unrealized option.”
- “China’s control over Mongolia’s southern border makes this less a logistics issue and more a geopolitical calculation.”
- “India will likely pursue this again in 2025, but meaningful movement requires trilateral diplomacy, not just commercial contracts.”
Outlook: 2025 Could Be a Pivotal Year
As India enters another strong construction cycle next year, pressure to secure diversified coking coal supply will increase. If New Delhi and Ulaanbaatar can make headway in talks with China or Russia on transit guarantees, the prospects for Mongolian coking coal may shift. Until then, steelmakers are likely to continue watching — curious, interested, but cautious.
