[SMM Analysis] Significant Decline in LMO Production in January, February Expected to Continue Downward Trend

India's second-largest steelmaker, Tata Steel, reported first-quarter FY2026 operating results, with domestic crude steel production increasing by more than 10% YoY to 5.76 million tonnes, while steel deliveries rose nearly 9% YoY to 5.17 million tonnes, driven by higher output at its Jamshedpur and Kalinganagar plants. Meanwhile, elevated coking coal and iron ore prices pushed material costs up 12% year on year. The higher level of steel production indicates that Indian steel demand remains resilient, providing continued support for metallurgical coal consumption. Despite elevated coking coal costs, Tata Steel maintained strong production, suggesting that Indian steelmakers are unlikely to significantly reduce metallurgical coal procurement in the near term. In addition, the company has approved a 4.8 million tonnes per annum steelmaking capacity expansion at its subsidiary Neelachal Ispat Nigam, which could further support metallurgical coal demand over the longer term.

A methane gas explosion at a coal mining complex in Pakistan's Balochistan province killed at least 11 miners, left 25 others missing, and damaged two adjacent mines. Rescue operations are ongoing, while authorities have launched an investigation. Mining activities at the affected site are expected to remain suspended pending safety inspections. The disruption may tighten coal supply in Balochistan in the short term. However, as Pakistan is not a major exporter in the global seaborne coal market and most of its coal is consumed domestically, the incident is expected to have only a limited impact on international thermal and metallurgical coal markets. Market attention will now focus on whether safety inspections are expanded to other mines, which could further tighten domestic supply and increase Pakistan's import demand.

Whitehaven Coal reported FY2026 ROM production of 40.3 Mt, up 3% year on year and at the top end of its production guidance, while equity sales reached 26.0 Mt. June quarter ROM production totaled 10.7 Mt, up 13% quarter on quarter, with Queensland (QLD) operations—the company's key metallurgical coal assets—rising 41% QoQ to 5.7 Mt, largely recovering from weather-related disruptions in the previous quarter. The recovery in Queensland output is expected to lift Australian seaborne metallurgical coal exports, easing earlier supply concerns. Against a backdrop of weak global steel demand and cautious steel mill procurement, improved supply is likely to reduce competition for spot cargoes and place moderate downward pressure on international seaborne metallurgical coal prices.