SAIL and NMDC Asked to Scout Overseas Iron Ore and Coking Coal Assets to Lower Steelmaking Costs

Market snapshot: The Steel Ministry has asked state-run giants Steel Authority of India Limited and NMDC to explore and acquire overseas mineral assets. The directive is focused on securing long-term coking coal and iron ore supplies to shield domestic production from international price volatility and lower input costs.

Data Snapshot

• SAIL recorded a 13% YoY growth in sales to 1.87 MT in August 2026, with crude steel production increasing 8% to 1.68 MT.
• SAIL reported a 138% YoY increase in net profit to ₹1,636 crore for Q1 FY27, with EBITDA rising 49% YoY to ₹4,356 crore.
• NMDC registered iron ore production of 4.07 MT in August 2026, reflecting a 20.8% YoY growth, while sales stood at 3.58 MT, representing a 5.6% YoY growth.

What's Changed

• Transition from a purely opportunistic global sourcing model to an active, ministry-backed exploration for overseas mineral assets.
• Intensified bilateral engagements: Following a high-level delegation visit in May 2026, SAIL and NMDC have been actively exploring coking coal acquisitions and nickel supplies in Russia, with SAIL setting up an internal committee to evaluate these opportunities.

Key Takeaways

• Strategic Mandate: The Steel Ministry is prioritizing long-term raw material security to lower input costs and support India's targeted steel capacity of 300 MTPA by 2030.
• High Import Dependence: Domestic steelmakers remain highly vulnerable to volatile seaborne coking coal prices, of which India imports about 90% of its requirements.
• Strong Operational Backing: The directive is issued at a time of robust operational momentum, with NMDC's mines achieving their highest-ever August production in 2026.

SAHI Perspective

The government's directive for SAIL and NMDC to scout overseas assets represents a crucial structural intervention to protect the margins of domestic steelmakers. Currently, coking coal price volatility directly impacts EBITDA margins, as seen during prior periods of raw material price escalation. By securing captive assets abroad—either individually or through the International Coal Ventures Limited consortium—these companies can decouple their production costs from fluctuating spot market prices, paving the way for sustainable long-term profitability.

Market Implications

For SAIL, securing overseas coking coal reserves will significantly reduce its import bill, which has historically been a key headwind. This will strengthen its cost competitiveness as it scales up capacity. For NMDC, venturing into global coking coal mining allows the country's leading iron ore producer to diversify its revenue streams and build global operational expertise, aligning with its iron ore production targets. Across the broader steel sector, a secure supply of coking coal will help stabilize domestic steel prices, benefiting downstream infrastructure and manufacturing.

Trading Signals

Market Bias: Bullish

The directive to secure captive overseas coking coal assets represents a positive structural driver for SAIL's long-term operating margins by reducing import dependence. Furthermore, SAIL's strong Q1 FY27 net profit of ₹1,636 crore and robust August sales growth provide a highly supportive financial backdrop.

Overweight: Metals, Mining, Steel

Trigger Factors:

• Finalization of joint ventures or asset acquisitions in key coking coal geographies, particularly Russia or Australia.
• Stabilization or decline in global coking coal spot prices.
• Progress on NMDC's overseas critical mineral and coking coal exploration blocks.

Time Horizon: Medium-term (3-12 months)

Industry Context

India is the world's second-largest crude steel producer, with its total steelmaking capacity reaching approximately 221.9 MTPA in mid-2026. However, the industry suffers from a structural deficit in metallurgical coal, importing nearly 90% of its requirement. This makes state-owned steelmakers heavily dependent on volatile global markets. Directing PSUs to establish captive assets abroad is a key pillar of the National Steel Policy's vision to sustainably scale production.

Key Risks to Watch

• Geopolitical and Regulatory Hurdles: Sourcing assets in complex geopolitical jurisdictions like Russia or navigating strict environmental laws in Australia can cause long delays.
• Financial Burden: Capital-intensive overseas acquisitions could strain cash reserves and increase leverage if not managed through balanced joint ventures.
• Execution Risks: Operating mines in foreign regions involves logistical challenges and long gestation periods before production actually feeds domestic plants.

Recent Developments

In late September 2026, NMDC successfully lit up the Indurating Machine at its 2 MTPA Nagarnar Pellet Plant and commissioned its ₹5,427 crore iron ore processing plant and 135-km slurry pipeline. SAIL announced a 13% YoY growth in its August 2026 sales to 1.87 MT, and NMDC declared a final dividend of ₹1.00 per share with an ex-date of October 5, 2026.

Closing Insight

The Steel Ministry's directive signals a proactive approach to resource security, transforming SAIL and NMDC from domestic operators into strategic global players. Successfully securing overseas coking coal and iron ore reserves will establish a highly resilient input cost structure, shielding India's steel expansion from international price shocks.

High Performance Trading with SAHI.