India imports a large share of its crude oil, liquefied natural gas (LNG) and liquefied petroleum gas (LPG) through a region that remains vulnerable to geopolitical disruption, with its energy security heavily exposed to instability in the Middle East and critical shipping routes such as the Strait of Hormuz.
That risk is now shifting into the steel sector as well, where fuel shortages, shipping disruptions and rising input costs have started to affect operations.
The fuel disruption is not limited to one part of steelmaking. LNG shortages are affecting gas-based ironmaking operations, while LPG shortages are disrupting stainless-steel processes.
India’s small steelmakers, who are dependent on LNG, have been facing production cuts as supplies tighten due to the conflict. Some producers warned that output could be cut sharply if fuel supplies do not normalize.
The ongoing conflict has once again highlighted a major energy security risk for India’s steel sector: its heavy dependence on imported metallurgical (met) coal, also known as coking coal. India imports about 90% of its met coal requirements, mostly from Australia, exposing steelmakers to global supply and price volatility. The market was already volatile, and the current conflict is now making that dependence even riskier.
Australian premium hard coking coal prices in January 2026 hit a 17-month high, as heavy rains and flooding in Queensland disrupted mining operations. As Australia dominates the global met coal supply, this event reflected supply disruption and stronger price pressure worldwide. Moreover, as the Iran war started to worsen, global coking coal prices rose again in the second half of March, adding to cost pressure on steelmakers.
It is worth noting that this is the second time in four years that a military conflict has caused a fossil fuel crisis. The Russian invasion of Ukraine saw coal prices surge sharply, reducing Indian steelmakers’ operating margins by about five percentage points. This shows that, like natural gas, met coal prices can also be highly volatile, often squeezing margins.
For steelmakers, what matters is the delivered cost, not just the mine price. S&P Global has reported that the conflict has sharply increased freight costs, with capesize freight rates rising from $9.80 to $12.20 per tonne within initial weeks of March 2026, driven by higher bunker fuel prices and disruptions around the Strait of Hormuz. This directly increased the landed cost of met coal and iron ore for Indian steel mills, leading them to raise domestic steel prices to protect margins.
The impact of the Iran war is also affecting some of the key inputs India will need for a lower-emissions steel future.
As India aims to transition towards lower carbon pathways such as scrap-based steelmaking and hydrogen-based ironmaking, access to good-quality scrap, higher-grade iron ore and direct reduction (DR)-grade pellets will become essential. The current conflict is also showing vulnerabilities of these supply chains.
At the same time, India’s iron ore imports are now expected to rise to a seven-year high in FY2025–26, mainly because domestic steelmakers need higher-quality iron ore that is not always available domestically. A large share of these imports, around 70% has come from Brazil and Oman. Separately, imports of iron ore pellets have risen to around 1.88Mt (Apr 2025–Feb 2026), with India also sourcing cheaper pellets from Iran, which are now at risk due to the conflict.
S&P Global notes that the Middle East countries account for more than 38% of global DRI production, and that ongoing conflict could disrupt DR-grade pellet flows and investment in low-carbon ironmaking. Further, the conflict could lift iron ore freight rates to Asia, increasing the delivered cost of ore and related input.
The real lesson from this crisis is that India’s steel sector remains vulnerable as its growth is still tied to imported and globally exposed inputs. India therefore needs a steel energy security strategy, not just a steel growth strategy.
In the near term, this means strengthening domestic energy, scrap and iron ore security, while reducing exposure to fragile trade routes and fuel systems.
One likely outcome of the regional conflict is that the energy security value of domestically produced green hydrogen will be re-assessed. China is already clearly indicating that it sees green hydrogen as a pillar of its energy security efforts going forward.
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In the longer term, India needs to reduce dependence on imported fossil-linked steelmaking inputs altogether. That means:
India’s steel future will depend not only on how much it produces, but on how it can produce without the energy security risk.
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