JSW Steel's Mongolian Coal Gambit Stumbles Amid Logistics and Geopolitics

India’s steel industry, a cornerstone of its manufacturing ambitions, faces a critical crossroads. For JSW Steel—India’s largest steelmaker by capacity—the quest to secure affordable coking coal, a vital raw material for steel production, has hit a wall. Sources report that the company’s efforts to diversify its supply chain by importing coking coal from Mongolia have been derailed by logistical nightmares and geopolitical tensions. The stakes could not be higher: India’s coking coal imports must nearly triple by 2030 to keep pace with rising steel production. Yet, as this analysis reveals, the path to diversification remains fraught with obstacles.

The Mongolian Dilemma: A Logistical Quagmire

JSW Steel’s plan to source 2,500 metric tons of coking coal from Mongolia, alongside Steel Authority of India’s (SAIL) ambitious 75,000-ton target, has been stymied by two intractable problems. First, Mongolian suppliers have been unresponsive, leaving contracts unsigned. Second, Mongolia’s landlocked geography forces reliance on transit routes through Russia or China—both of which present their own complications.

Russia’s rail infrastructure, already strained, cannot reliably handle increased Mongolian coal volumes. Meanwhile, China—a potential transit route—remains a diplomatic minefield. Border disputes with India, dating back to the 2020 military clash in Ladakh, have kept cross-border cooperation fragile. Even temporary agreements, such as January 2025’s trade pact, have not eased the strain.

The result? Trial imports from Mongolia, initially slated for "later this month," remain delayed. Steel Secretary Sandeep Poundrik bluntly acknowledged the challenges: "Mongolia’s geographic constraints make sourcing coking coal logistically problematic."

Geopolitics and Global Supply Chains

The broader context is one of India’s precarious reliance on imported coking coal. The country meets 85% of its needs through imports, with Australia supplying over half. Yet Australia’s dominance has spurred a push to diversify. Mongolia, with its high-grade coking coal reserves and lower prices, seemed an ideal partner. But geopolitical realities undercut this strategy.

JSW’s current supply chain already spans Australia, the U.S., and Mozambique, with nearly a third of its coking coal sourced from Russia. Despite this, the company has ruled out increasing Russian imports, citing a strategy to avoid overexposure to a single region—a prudent move given Russia’s own logistical bottlenecks and the risk of geopolitical instability.

Domestic Challenges Compound the Crisis

Even if JSW could secure Mongolian coal, India’s domestic infrastructure struggles would still hinder progress. Railway congestion in key steel-producing states like Odisha and Karnataka has exacerbated distribution delays. Steel Secretary Poundrik warned that imports must surge to 160 million tons by 2030—nearly tripling current volumes of 58 million tons—to meet rising demand.

A Strategic Crossroads for JSW

JSW’s CEO, Jayant Acharya, has emphasized the need for strategic foreign investments to mitigate supply risks. This aligns with the company’s existing global footprint, but the path forward is unclear. Mongolia’s potential remains untapped, and the company’s focus on multiple suppliers—Australia, the U.S., Mozambique—appears to be its best hedge against disruption.

Conclusion: The Cost of Overreliance on Fragile Supply Chains

JSW Steel’s Mongolian misadventure underscores a stark reality for Indian industry: diversifying coking coal supplies is critical, but execution remains perilous. With imports already down 0.7% in fiscal 2025 despite rising steel output, the gap between supply and demand is widening.

The numbers are stark. To meet the 2030 target of 160 million tons, India must nearly triple its imports in just seven years—a goal that hinges on resolving logistical and geopolitical bottlenecks. For investors, JSW’s situation highlights two risks: overexposure to volatile supply chains and the high cost of operational delays.

Yet there’s also a silver lining. If JSW can navigate these challenges—whether through strategic asset acquisitions abroad or domestic infrastructure upgrades—it could emerge as a leader in a sector vital to India’s economic growth. For now, though, the road to 2030 looks bumpy.

As the old investing adage goes: Location, location, location. For JSW Steel, it might just be Logistics, logistics, logistics.