A new report by the Institute for Energy Economics and Financial Analysis (IEEFA) shows that although the government and steel producers in India have begun reducing their dependence on Australia, the country needs to act much faster to ensure long-term energy security.
India aims to reach an annual crude steel production capacity of 300 million tons by 2030, and much of this growth is based on blast furnace (BF) technology. However, the high ash and sulfur content of domestic metallurgical coal means it fails to meet quality requirements, leaving the country dependent on imports. Today, India sources around 90 percent of its metallurgical coal—mostly from Australia, the world’s largest exporter of met coal.
According to IEEFA, the future reliability of supply from Australia may not provide the stability the sector needs. Overly optimistic export forecasts, slow mine development, increasing financial and legal pressures, regulatory constraints, rising mining costs and climate-driven price volatility are exposing Indian steel producers to a serious supply gap risk. The report notes that if India continues to expand its blast furnace capacity, structural and prolonged price increases will become inevitable due to challenges in developing new supply.
“India will need to move earlier on emissions reduction”
Simon Nicholas, co-author of the report and IEEFA Global Steel Lead Analyst, emphasized that rising concerns over methane emissions and ongoing legal processes related to coal mining in Australia are increasingly constraining the sector. He stated, “Objections to coal mine capacity expansions are succeeding in Australian courts based on climate and emissions grounds,” adding that India is under time pressure. “India has a 2070 net-zero target, yet it depends on coal imported from a country with a 2050 target. It will therefore need to move earlier on emissions reduction. At COP30 in November 2025, Australia was among the countries that signed the Belém Declaration, which calls for a fast and fair transition away from oil, gas and coal.”
The report details long-standing supply challenges, including rising mining costs, companies preferring to acquire existing operations rather than open new mines, the growing problem of methane emissions, and Australian banks withdrawing financing from new coal projects. It also outlines the steps India needs to take to accelerate a shift toward steel production technologies that do not rely on coal.
Saumya Nautiyal, IEEFA Steel Energy Finance Analyst and co-author of the report, noted that India’s solution lies in transforming its steel production technologies. Nautiyal stated, “The expansion of scrap-based electric arc furnaces, green hydrogen-based steelmaking and policy incentives for low-carbon technologies could gradually reduce India’s dependence on imported met coal. This would not only improve India’s energy security but also strengthen its competitiveness in global low-carbon steel markets.”
The report also highlights that India could become one of the most cost-competitive countries in the world for green hydrogen production. However, IEEFA stresses that the focus should shift from exports toward domestic use of green hydrogen in critical sectors such as steel. This approach, it states, would benefit both India’s energy security and its long-term steel production strategy.
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