India is set to commence importing coking coal from Mongolia on a trial basis later this month, according to two sources knowledgeable about the situation. This move by New Delhi aims to diversify its imports of the crucial steelmaking raw material and reduce its heavy dependence on Australia.

Steel manufacturers such as JSW Steel and the state-owned Steel Authority of India (SAIL) are expected to receive shipments of coking coal from Mongolia following several months of negotiations, the sources revealed. The Ministry of Steel, JSW Steel, and SAIL have yet to respond to emails from Reuters seeking comment.

JSW Steel is anticipated to receive approximately 30,000 metric tons of coking coal from Mongolia, while SAIL is likely to receive between 3,000 to 5,000 metric tons, the sources added. This would mark the second such shipment for JSW Steel, following its purchase of 8,000 metric tons in 2021.

The coal will be transported to India via Chinese ports, but Indian authorities are cautious about relying solely on China for steady supplies of Mongolian coking coal. Efforts are underway to explore alternative routes for these supplies, though specifics were not provided by the sources.

Indian steel mills have urged the government to intervene and facilitate the establishment of routes that guarantee regular supplies of high-grade coking coal from Mongolia. Without a reliable and sustainable route, Mongolia, which is rich in mineral resources, faces challenges in exporting its raw materials to countries like India.

Some Indian companies are also considering acquiring or leasing coal and copper assets in Mongolia. Indian steel companies consume approximately 70 million metric tons of coking coal annually, with imports meeting around 85% of the country's total needs.

Indian steel mills, the world's second-largest crude steel producers, have grappled with fluctuating supplies of coking coal from Australia, which typically accounts for over half of India's annual imports. In response, Indian steelmakers have increased their imports of coking coal from Russia, capitalizing on lower prices due to Western sanctions against Moscow over the Ukraine conflict.

During the first half of 2024, Russia became India's third-largest supplier of coking coal, selling 3.3 million metric tons, according to data from commodities consultancy BigMint.