Coking coal prices rose 25% to average $236/tonne in 2026, squeezing Indian steelmakers whose costs are about 40% coking coal, even as India expands capacity toward 500 Mtpa by 2047.
At a glance
- Premium hard coking coal averaged $236/tonne FOB Australia in the first seven months of 2026, up 25% year-on-year.
- Coking coal makes up around 40% of steel production costs in India, the world's second-largest crude steel producer.
- The price surge stems from slower new-mine ramp-up, Iran conflict-related pricing effects, Australian supply disruptions, and a deadly Shanxi province mine explosion that killed more than 80 people in China.
- India expanded steelmaking capacity to about 220 Mtpa in FY2026, up 10% year-on-year, despite the cost pressure.
What happened
Premium hard coking coal prices averaged $236 per tonne on a free-on-board Australia basis in the first seven months of 2026, up 25% from the same period a year earlier, squeezing margins for Indian steelmakers and delaying some capacity expansion plans. Coking coal accounts for around 40% of steel production costs in India, the world's second-largest crude steel producer after China, making the metallurgical coal market's tightness a direct hit to domestic steel economics. The price surge stems from several compounding supply disruptions: a slower-than-expected ramp-up of new mines, higher prices tied to the Iran conflict, supply disruptions in top producer Australia, and a deadly coal mine explosion in China's Shanxi province that killed more than 80 people. Despite the cost pressure, India has continued expanding steelmaking capacity, reaching roughly 220 million tonnes per annum (Mtpa) in fiscal year 2026, up 10% year-on-year, as the country targets 500 Mtpa of capacity by 2047.
The details
A 25% jump in coking coal prices lands differently on an Indian steelmaker than the equivalent move in almost any other input, simply because of how large a share of the cost base coking coal represents -- roughly 40%, according to industry estimates. That's a concentration few other major manufacturing inputs approach, which is why a price move that might be a manageable line-item elsewhere in the economy becomes a genuine margin threat for Indian steel producers specifically.
The drivers behind the surge aren't a single clean story but four separate disruptions landing close together. New mine capacity has been slower to ramp up than the market expected, tightening supply at the margin. The Iran conflict has added a geopolitical risk premium to energy and resource pricing broadly, coking coal included. Australia, the dominant supplier of premium hard coking coal to Asian steelmakers, has faced its own supply disruptions. And a coal mine explosion in China's Shanxi province that killed more than 80 people removed capacity from the world's largest coal-producing country at the same time -- a human tragedy that also happened to tighten an already-stressed global market. No single one of these fully explains a 25% price move, but stacked together over the same period, they add up to a supply shock steelmakers had little way to hedge against.
What makes India's position notable is that the country kept expanding capacity anyway -- to roughly 220 Mtpa in FY2026, up 10% year-on-year, on the way to a stated 500 Mtpa target by 2047. That's either evidence that Indian steelmakers see the coking coal price spike as a temporary supply disruption rather than a structural repricing, or a sign that the country's steel-capacity ambitions are being pursued regardless of near-term input cost cycles, betting that domestic and export demand growth will outrun the current cost pressure over the timeframe that matters for a multi-decade capacity buildout.
Why it matters
For India's steel industry, coking coal cost pressure is a direct threat to margins in a sector already capital-intensive and competing globally on price. For MetalsCost readers tracking iron and steel-adjacent markets, this is a reminder that iron ore prices are only half the input-cost story -- coking coal, imported almost entirely from Australia and a handful of other suppliers, can move Indian steel economics just as sharply, and often for reasons that have nothing to do with iron ore markets at all.
Our read
Outlook: bearish. Sustained high coking coal costs represent a genuine margin headwind for steelmakers dependent on the input, a bearish factor for steel producer profitability even as broader steel capacity expansion continues.
What to watch
- Whether coking coal prices ease as new mine capacity ramps up or hold near current elevated levels
- Recovery timeline for coal production in China's Shanxi province following the mine explosion
- Indian steelmakers' quarterly margin commentary on coking coal cost absorption versus price pass-through
For information only, not investment advice.
Iron price in India
metalscost.com India reference price as of 2026-10-03.
Detailed analysis
Supply Drivers
Coking coal supply has tightened due to a slower-than-expected ramp-up of new mines, supply disruptions in top producer Australia, and a deadly mine explosion in China's Shanxi province, pushing premium hard coking coal prices up 25% year-on-year to average $236/tonne FOB Australia in the first seven months of 2026.
Geopolitical Risks
The Iran conflict has contributed to higher coking coal prices as part of a broader energy and resource risk premium, compounding supply-side disruptions from Australia and China.
Mining Production
A coal mine explosion in China's Shanxi province killed more than 80 people and removed production capacity from the world's largest coal-producing country, adding to global coking coal supply tightness.
What could lift prices
- India continued expanding steelmaking capacity to about 220 Mtpa in FY2026, up 10% year-on-year, suggesting confidence in longer-term demand despite near-term input cost pressure.
What could weigh on prices
- A 25% rise in a cost input that represents around 40% of total production cost is a substantial margin headwind for Indian steelmakers with limited ability to pass costs through in a globally competitive market.
- Multiple compounding supply disruptions (Australia, China, Iran-linked risk premium) suggest the price pressure may not ease quickly.
Country impact
| Country | Impact | Reason |
|---|---|---|
| India | High | Coking coal accounts for around 40% of Indian steel production costs, making the 25% price surge a direct squeeze on domestic steelmakers' margins even as the country expands capacity. |
| Australia | Medium | As the dominant supplier of premium hard coking coal to Asian steelmakers, Australia's supply disruptions were a direct contributor to the global price surge. |
| China | Medium | A deadly coal mine explosion in Shanxi province, China's leading coal-producing region, removed capacity and added to global coking coal supply tightness. |
Industry impact
| Industry | Effect | Reason |
|---|---|---|
| Steelmaking | Negative | Coking coal makes up roughly 40% of Indian steel production costs, so a 25% price surge directly squeezes steelmaker margins and has delayed some capacity expansion plans. |
Who gains, who loses
- Coking coal exporters, particularly in Australia: Higher coking coal prices directly benefit exporters even as the same price rise squeezes buyers like Indian steelmakers.
- Indian steelmakers: Facing a 25% rise in a cost input that represents roughly 40% of total steel production costs, with some capacity expansion plans already delayed as a result.
Other ways this could play out
- If new mine capacity ramps up faster than expected or the Shanxi mine's output is restored, coking coal prices could ease back toward pre-surge levels.
- If supply disruptions persist or worsen, Indian steelmakers could face further delays to capacity expansion plans beyond what has already occurred.
Price risks
- Further supply disruptions in Australia or China could extend or deepen the current coking coal price surge
- A resolution of the Iran conflict or faster-than-expected new mine ramp-up could ease price pressure sooner than currently expected
Historical comparison
- First seven months of 2025: Premium hard coking coal prices were roughly 25% lower than the equivalent 2026 average of $236/tonne FOB Australia.
Technical view
Price is mixed relative to its 20-period and 50-period moving averages, showing no clear trend alignment.
Computed from metalscost.com's own stored price history.
India
Australia
China