Green steel could cut India’s $1T coal bill by 2035

Why green steel is back in focus

India’s push to expand crude steel capacity is colliding with a hard constraint: dependence on imported metallurgical (met) coal. A report flagging that green steel can help India avoid a $1 trillion coking coal import burden has sharpened attention on alternatives to coal-based iron-making. A new briefing note by the Institute for Energy Economics and Financial Analysis (IEEFA) argues the risk is not just cost but also energy security, as supply chains face price shocks, climate disruptions, and freight constraints. The issue matters because India is targeting 300 million tonnes per annum (MTPA) of crude steel capacity by 2030, which will lift demand for coking coal if the current technology mix remains intact. The briefing also challenges the idea that shifting import sources, including towards the United States, can materially reduce exposure. Instead, it frames technology choices as the core lever for reducing long-term dependence.

What IEEFA says about import dependence

IEEFA’s key warning is that India’s steel sector remains heavily exposed to imported inputs. The report says around 90% of India’s met coal requirement is met through imports, leaving producers linked to global seaborne pricing and shipping conditions. It adds that 64% of upcoming steel capacity expansion is anchored in coal-based blast furnace (BF) routes, a pathway that structurally locks in met coal demand. Even if India widens the supplier base, IEEFA argues the market remains interconnected, so price volatility and disruptions can still transmit quickly. The briefing note is titled “US met coal offers limited relief for India’s steel energy security” and positions diversification as only a partial response. It also points to technical and operational constraints at plants that limit flexibility in switching coal blends. In short, the report’s message is that the risk is embedded in the route chosen for iron-making.

Capacity expansion and the scale of coal demand

India’s 2030 capacity target implies a material increase in coal usage if BF capacity dominates new additions. The report says about 64% of the 382 MTPA capacity under development relies on coal-intensive BF technology. It cites an average requirement of 770 kilogrammes of met coal per tonne of steel, implying a large incremental call on imports. Specifically, the planned BF capacity alone could require an additional 140 MTPA of coal, which the report describes as nearly doubling current supply levels. This demand growth creates a larger exposure to shipping, weather-related disruptions, and geopolitical risks affecting commodity flows. It also raises the stakes for policy efforts aimed at lowering import dependence. The report frames these numbers as an energy security problem as much as a cost issue.

Why US coal diversification offers “limited relief”

The briefing note argues that buying more met coal from the US is not a structural fix. It points to global price linkages that keep India exposed even when it changes suppliers. It also flags higher freight costs and limited US export capacity as constraints on relying on the US for large incremental volumes. The report references recent bilateral trade engagement and concerns following the West Asia conflict, but still concludes that structural issues remain. It also notes technical constraints at Indian plants that reduce compatibility with certain coal types. Taken together, IEEFA’s view is that supplier diversification can marginally spread risk, but cannot eliminate it.

Australia’s role and plant-level switching constraints

IEEFA highlights that Australia still accounts for nearly half of global seaborne met coal exports, shaping international pricing. The report also notes that Indian steelmakers are adopting stamp-charging technology optimised for domestic and Australian coal blends. That optimisation can limit compatibility with US coal, raising switching costs and reducing flexibility at short notice. This matters in a volatile market because the ability to change blends quickly can be an operational advantage. If switching is costly or technically constrained, the benefit of diversification falls. In such a setup, supply shocks can translate more directly into cost pressure. The briefing uses these constraints to support its broader argument: technology and process choices inside steel plants are central to reducing exposure.

Import outlook: rising volumes against a tightening backdrop

The report cites S&P Global estimates that India’s met coal imports could rise to 149 million tonnes by 2035 from about 94 million tonnes in 2026. That projected increase aligns with the capacity buildout and the continued dominance of BF-based routes. Alongside this, the broader coverage notes that the US share of India’s met coal imports rose from about 8% in FY21 to roughly 15% in FY25, making the US India’s second-largest supplier. Yet, another datapoint in the supplied material says US metallurgical coal exports are forecast to decline to 38 million tonnes by 2035. If India’s demand rises while US export availability falls, it adds another constraint to the diversification strategy. This does not imply supply will vanish, but it supports IEEFA’s argument that import risks persist.

Domestic coal push: Mission Coking Coal and its limits

Policy efforts are underway to raise domestic output, but quality constraints remain a major barrier. The report notes that India’s reserves are largely unsuitable for steelmaking due to high ash content, keeping the country reliant on imports for about 90% of its met coal needs. Mission Coking Coal aims to raise domestic metallurgical coal output, with one part of the supplied text citing a target of 140 million tonnes by 2030 from 66 million tonnes in 2025, and another citing a target of 140 million tonnes by 2029-30. Even with these goals, the report and cited estimates indicate deficits may persist as steel capacity grows. The article material also notes India has designated coking coal as a critical and strategic mineral, aiming to speed approvals and accelerate exploration and mining activities. These steps may help, but the report’s position is that domestic supply expansion alone may not neutralise import exposure if BF additions continue.

Alternatives highlighted: scrap-based EAF and green hydrogen

IEEFA’s recommended path is a technology shift rather than just a supplier shift. It urges accelerating scrap-based electric arc furnace (EAF) steelmaking and scaling up green hydrogen-based production. The logic is straightforward: green hydrogen can replace coking coal in iron-making, and India’s renewable energy resources are described as abundant and relatively low-cost, creating a foundation for domestic green hydrogen and green steel production. The report adds that reducing reliance on imported met coal is crucial for a resilient and low-carbon steel sector aligned with energy security goals. It also stresses that without a shift towards alternative technologies, diversification alone will not resolve underlying energy security challenges. This makes the transition debate not only about emissions, but also about import vulnerability.

Market impact: what the report implies for the sector

For steelmakers, the report frames met coal import dependence as a recurring cost and continuity risk, especially as expansion plans roll out. The briefing note highlights exposure to global price volatility, supply disruptions, and climate risks even with diversified supply. For investors and industry watchers, the key variable becomes the capex and execution pathway for alternative routes, including scrap-based EAF capacity and green hydrogen integration. The report’s numbers also suggest that the BF-heavy pipeline could mechanically raise import requirements, tightening the link between Indian steel output and international met coal markets. Policy initiatives such as Mission Coking Coal may ease part of the constraint, but the report cautions that quality issues and supply gaps can remain. The clearest takeaway is that technology mix in new capacity will shape long-term exposure more than changes in supplier geography.

Key facts from the briefing and cited estimates

What to watch next

The IEEFA briefing puts the spotlight on how India sequences its steel expansion and which production routes dominate new capacity. It also highlights near-term constraints that limit the benefit of shifting imports towards the US, including freight, export capacity, and plant-level coal blend compatibility. On the policy side, Mission Coking Coal and the designation of coking coal as a critical mineral signal a push to raise domestic output and speed project approvals. But the report’s central recommendation remains a shift towards scrap-based EAF and green hydrogen-based steelmaking to reduce import dependence. The next set of disclosures from policymakers and producers on technology roadmaps, scrap availability planning, and green hydrogen scale-up will matter for judging how quickly the risk profile can change.