Strains in Australian Met Coal Supply Heighten India’s Energy Security Risks: IEEFA

Growing strains in Australia’s metallurgical (met) coal supply have intensified energy security concerns for India, which relies on imports to meet nearly 90 per cent of its requirements, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA).

Met coal, or coking coal, is essential for producing coke the fuel and reducing agent used in blast furnace steelmaking. Since India’s steel capacity growth continues to rely heavily on the blast furnace (BF) route, high-quality met coal remains a critical input. Domestic supplies, however, are unsuitable due to high ash and sulphur content, forcing Indian steelmakers to depend on imported coal, primarily from Australia.

Although the Indian government and steelmakers have taken steps to diversify their sourcing, IEEFA warns that India must accelerate its transition to alternative technologies to avoid long-term risks.

India has set a target of achieving net-zero emissions by 2070, while Australia aims to reach the same goal by 2050 two decades earlier. This gap creates a strategic vulnerability for India. Since Australia must adopt emissions-cutting measures sooner, it will likely impose stricter climate policies earlier, affecting the availability and cost of met coal exports. During COP30 in November 2025, Australia also signed the Belém Declaration, committing to a rapid and just transition away from coal, oil and gas, further signalling long-term supply constraints.

“Key risks include heightened scrutiny of methane emissions from Australian met coal mines and legal challenges against coal expansion on environmental grounds,” said Simon Nicholas, Lead Analyst, Global Steel at IEEFA and co-author of the report. These pressures, he noted, could make Australian supply increasingly uncertain.

The report highlights additional challenges such as rising mining costs, companies preferring to acquire existing assets instead of developing new mines, the withdrawal of financing for greenfield projects by Australian banks, and the persistent challenge of methane control.

Saumya Nautiyal, Energy Finance Analyst, Steel at IEEFA and co-author, said that India’s shift towards scrap-based electric arc furnaces (EAFs), green hydrogen-based steelmaking and policy incentives for low-carbon technologies could gradually reduce its dependence on imported met coal. “Such a shift will not only strengthen India’s energy security but also improve its position in global low-carbon steel markets,” she said.

IEEFA cautioned that continued expansion of the BF route could expose Indian steelmakers to severe supply disruptions, structural price hikes and extreme volatility. Over-optimistic Australian export forecasts, regulatory pressures, slowing mine expansion and climate-driven price swings further heighten the risk.

The report concludes that accelerating the adoption of low-carbon steelmaking technologies is now critical for India to insulate its steel sector from future supply shocks and ensure long-term energy security.