In a bid to reduce costly imports of coking coal and its hgh dependence on Australian coal imports, India is attempting to acquire a coal mine in Mongolia and set up a steel plant there.

The Indian Government says the plan is to first supply the coal needed for the steel plant and then export the rest to India. The country is battling a massive shortage of hard coal for cokemaking.

For the first time last year, China imported more coal from Mongolia than from Australia. By securing its own feed, and especially with Australian coal prices hitting growing rapidly, India will soon be able to tap into what is considered a rich resource.

Coking coal prices from Australia shot up last year, to more than US$ 300/t, after floods took out 16Mt of annual production from the Queensland mines, in late 2010 and 2011. The drastic rise in prices hit the bottom lines of Indian steelmakers, who rely mainly on imports to meet their requirements. Australian coking coal prices shot up from US$125 in 2010 to US$ 350 in 2011. Currently, the price is moving between US$200/t US$230 /t. India currently imports most of its coking coal from Australia and with India’s steel capacity growing the demand for coking coal is expected to move up proportionally.

Despite abundant coking coal mines, Mongolia does not have any steel plant in the country. The reciprocal arrangement would be to set up a steel plant there and the Mongolian Government would, in turn, allocate coking coal mines.