India explores new coking coal frontiers in Russia and Mongolia, eyes own pricing mechanism and index creation

SS: India’s Steel Ministry is looking to diversify its sourcing of coking coal, with Russia and Mongolia identified as key new markets, while plans are underway to establish the country’s own mechanism for determining coking coal prices and creating an index. India, the world’s second-largest steelmaker, is the largest importer of coking coal. Australia accounts for 70 per cent of supplies.

After discussions with industry on Monday, it has been decided that trial runs for two shipments of coking coal from Mongolia — around 3 lakh tonnes — will be considered over the next three to six months, senior officials taking part in the meetings told businessline. The Trans-Siberian – Mongolian railwaywill be tapped.

One point that came up was the need to have a “more realistic” price discovery mechanism in terms of coking coal. India does not have its own price discovery mechanism, and two global indexes — Platts and Argus — are generally followed. These two have been criticised as “subjective.” Another criticism is that liquidity in the spot market is low 4 – 6 per cent, and this small quantity determines the price, especially in India. Deals between certain coal suppliers and their sister trading companies, or trader-to-trader bids and offers, get registered in the global indexes, thereby impacting the discovery mechanism, including spot prices.

At the meeting, it was also decided that Mongolia would be tapped for coking coal. A team comprising officials from Ministry and industry representatives will soon visit the Central Asian nation to work out logistics and see if additional investments are required to be made there or not. The catch: Mongolia is a land-locked nation and shares borders with China and Russia. And India will be seeking alternative routes to China, including tapping the Vladivostock-Chennai route, to secure coal. “Any route through China has to be avoided,” said a source.