Steel Has a Hidden Coking Coal Dependency

20 August 2026

Executive Summary

When businesses think about steel supply, the obvious raw material is iron ore.

For much of the world’s conventional steel production, another material is equally critical:

metallurgical — or coking — coal.

Indian steelmakers are currently facing sharply higher coking-coal costs following supply disruption in Australia and China, compounded by higher freight and insurance costs.

Reuters reports that premium Australian hard coking-coal prices averaged approximately $236 per tonne during the first seven months of 2026 — around 25% higher than a year earlier.

India provides a particularly striking example of dependency.

The world’s second-largest crude-steel producer imports approximately 95% of its coking-coal requirements, with at least half arriving from Australia. Coking coal represents nearly 40% of production costs for affected Indian steelmakers, according to Reuters.

Every $10 per tonne increase in coking-coal prices can add approximately $7–$9 per tonne to steelmaking costs for blast-furnace producers.

The wider lesson is excellent:

The material everybody associates with a product may not be the material most capable of disrupting its production.

UK Impact

Steel is embedded throughout UK business and infrastructure, including:

• Construction.
• Automotive manufacturing.
• Machinery.
• Rail.
• Energy projects.
• Warehousing.
• Pipelines.
• Defence.
• Engineering.
• Industrial equipment.

Companies purchasing fabricated steel products may never purchase coking coal directly.

Nevertheless, disruption in metallurgical-coal markets can feed through into:

• Steel pricing.
• Production margins.
• Lead times.
• Supplier viability.
• Project budgets.
• Contract escalation clauses.
• Infrastructure costs.

That makes this a classic tier-three or tier-four supply-chain exposure.

The immediate UK supplier may appear entirely secure while its upstream steel producer becomes squeezed by a commodity that the UK buyer never sees.

Global Impact

The World Steel Association estimates that approximately one billion tonnes of metallurgical coal are used annually in global steel production. Coke remains the primary reducing agent in traditional blast-furnace steelmaking.

Recent price pressure illustrates how several unrelated disruptions can converge on one industrial input.

Reuters identifies:

• Supply disruption in Australia.
• Slower development of new mines.
• A major mine disaster in China’s Shanxi province.
• Higher freight and insurance costs.
• Continuing Middle East disruption.

The IEA has separately documented how weather-related disruption can constrain Australian metallurgical-coal exports and how global coal trade remains vulnerable to logistical and geographic concentration.

Indian producers are attempting to diversify supply towards countries including Mozambique, Russia and the United States, but logistics and product-quality requirements limit how rapidly substitution can occur.

Our View

Businesses should identify hidden process inputs behind strategically important products.

Companies should ask:

• What materials are necessary to manufacture the product we buy?
• Which of those inputs are globally concentrated?
• Where does our steel supplier source metallurgical coal?
• Are alternative grades technically interchangeable?
• How quickly can another source be qualified?
• Are several steel suppliers relying on Australian material?
• Do contracts permit raw-material surcharges?
• Are project budgets resilient to steel-cost escalation?
• Could supplier margins become unsustainable before prices are passed on?
• Does procurement monitor upstream materials it does not purchase directly?

Supply-chain mapping often stops one stage too soon.

Knowing where steel comes from is useful.

Knowing what the steel mill itself cannot operate without is considerably more valuable.

The important dependency in a finished product may therefore be a commodity your company has never purchased, stored or even discussed.

Risk Indicator: ELEVATED

Disclaimer

The information contained within these Market Alerts is provided for general market awareness and informational purposes only. It does not constitute financial, legal, investment, regulatory or insurance advice. Whilst every effort has been made to ensure accuracy at the time of publication using multiple reputable and independently verified sources, geopolitical events, legislation, regulation and market conditions may change rapidly. Readers should obtain appropriate professional advice before acting upon any information contained herein.

Invictus Risk Solutions LLP – Helping organisations stay ahead of emerging risks through informed insight and independent analysis.