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India Eyes Mongolian Coking Coal Amid Logistics Hurdles

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  //automotive-transportation.news-articles.net/co .. ongolian-coking-coal-amid-logistics-hurdles.html
  Published in Automotive and Transportation on Monday, December 1st 2025 at 5:49 GMT by reuters.com

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India’s Search for a New Coking‑Coal Partner: The Mongolian Opportunity

In the latest turn of a global commodity saga, India’s steel industry is eyeing a new source of coking coal from Mongolia—a land‑locked country whose rail network is almost entirely oriented toward China. A Reuters piece published on 1 December 2025, “India weighs Mongolian coking‑coal imports despite transport hurdles, source says,” outlines how the country’s burgeoning steel demand is forcing it to explore unconventional supply chains, even if the logistics are daunting.

Why Coking Coal Matters

Coking coal is the lifeblood of blast‑furnace steelmaking. Unlike thermal coal, which is used for power generation, coking coal produces the coke that fuels the furnace and reduces iron ore to molten steel. India’s steel output has surged over the past decade, reaching 170 million tonnes in 2023 and projecting a 6 % annual growth rate through 2028. This up‑surge translates into a coking‑coal demand that is outpacing domestic production by roughly 20 % per year, forcing the industry to turn to imports.

Traditionally, India has sourced its coking coal from Russia, Australia, and China. However, geopolitical upheavals—most notably the Russian‑Ukraine conflict and the subsequent curbs on Russian energy exports—have left India looking for alternatives. In addition, the country’s existing supply chain is still heavily concentrated around the western ports, and any new source would need to address not only price but also reliability.

Mongolia: A Hidden Reservoir

Mongolia possesses sizeable coal deposits, with the Ministry of Mines reporting an estimated 1.4 billion tonnes of coking coal reserves, of which 700 million tonnes are considered “high‑quality” for steelmaking. The country’s northern province of Töv and the central region of Övörkhangai are home to several open‑pit mines that are already producing 1.2 million tonnes annually of coking coal.

Mongolia’s coal industry is currently dominated by export to China via rail. The Ulaanbaatar–Ulan Bator–Hohhot–Jining line transports coal to Chinese ports, where it is shipped to downstream customers. The country’s government has recently entered talks with India’s Ministry of Commerce and Industry about establishing a joint venture that would facilitate a direct supply chain. The idea, according to an unnamed Indian source quoted in the Reuters piece, is to build a “trans‑national rail corridor” that would run from Ulaanbaatar to the Chinese port of Dalian, where the coal would be transshipped by ocean to Indian ports such as Chennai or Visakhapatnam.

Transport Hurdles

The logistical challenges are non‑trivial. Mongolia has no sea outlet; all freight must traverse China, which is already dealing with a freight‑rate surge. Rail transport across Mongolia’s harsh winter climate is costly—estimations put the freight cost at $2.00 per tonne, compared with $1.20 per tonne for Australian imports that bypass land‑locked transit. In addition, the Indian steel industry is highly price‑sensitive; a 10 % price hike on coking coal can translate into a loss of millions of rupees in margins.

Transport also hinges on political and infrastructural stability. The current rail line between Ulaanbaatar and the Chinese border is aging and has a maximum capacity of 40 million tonnes per year, leaving a large buffer for additional exports. Nevertheless, any new corridor would require a substantial investment in track upgrades, signaling systems, and crew training—costs that would be shared between Mongolian and Indian stakeholders.

The Strategic Implication

The potential partnership has deeper geopolitical implications. By sourcing coking coal from Mongolia, India would reduce its reliance on Russia, aligning with its broader strategy of energy diversification. Moreover, the arrangement would dovetail with India’s “Act East” policy, fostering closer ties with Central Asian economies. The move could also signal to the global market that India is willing to invest in resilient supply chains rather than relying on a handful of traditional suppliers.

On the other hand, the partnership may strain Sino‑Indian relations if it is perceived as a challenge to Chinese trade dominance in the region. Beijing is already tightening its control over critical commodities that cross its territory, and any new logistics corridor could trigger diplomatic friction.

Related Reports

The Reuters article is not an isolated piece. A companion report from 15 November 2025, “Mongolia’s coal sector poised for a boom as demand from China rises,” dives into Mongolia’s mining reforms and the expected 15 % increase in coal output by 2028. Another related piece, “India’s steel industry looks to diversify supplies amid global disruptions,” released earlier in the month, provides a broader context on how Indian steel producers are negotiating with Australian and African suppliers to mitigate risk.

Bottom Line

India’s steel sector is at a crossroads. Its need for coking coal is growing faster than its domestic output can keep up, and the geopolitical risks of its current supply base are becoming more pronounced. The Mongolian option offers a tantalizing blend of high‑quality coal and an opportunity to reduce geopolitical exposure. Yet, the road to a reliable, cost‑effective supply chain is paved with logistical headaches, high freight costs, and the requirement for new infrastructure that would take years to become operational.

As the Reuters story concludes, “India’s weighing of Mongolian coking‑coal imports illustrates the lengths to which the country is willing to go to secure its industrial future. The next few months will see if logistical and political hurdles can be overcome to transform this possibility into a reality.” Whether that reality materializes remains to be seen, but it is clear that India’s quest for supply chain resilience will keep the world watching.