The country’s largest coal miner, Coal India Ltd (CIL), registered continual uptick in demand for coal sales via the auction route as rising prices in global markets have incited renewed interest in domestic coal.
Auction sales increased 43% m-o-m to 8.26 mn t in Jul’21 compared to 5.76 mn t in Jun’21.
But, more importantly, the booked volume was sold at an average price of INR 1,841.61/t, thus garnering premium of 40% over the assessed notified price of INR 1,315.92/t. Incidentally, it was the highest premium recorded for auction sales since Feb’20.
On the back of the Covid-led demand contraction, the company had been struggling to raise coal allocations via the auction route. As a result, bid premium for overall coal sales fell to 17% in FY’21 against 47% in FY’20.
However, gradual rise in imported coal prices, which have increased almost 56% since the beginning of 2021, has prompted coal buyers to switch to the domestic market in order to fulfil their demand.
In fact, the sole auction concluded for coal importers under the special spot scheme had received overwhelming response wherein out of the 1.6 mn t coal on offer, 1.58 mn t was sold.
Scope for improvement
The power sector has been critical for the growth in CIL’s coal offtake, but it has not shown any remarkable growth in term of auction sales.
CIL had offered the highest coal volume on offer via the special forward auction during Jul’21, meant especially for the power sector. In this, only 41% of the coal was booked.
In contrast, the exclusive auction for the non-power sector had seen comparatively better sales. Not only was higher coal allocation seen against the offered quantity, it also fetched superior premium compared to the special forward auction.
In the midst of rising coal offers, the end-user industries have shown modest interest in imports as prices have increased beyond their workable limit.
To gain market share, it is expected that CIL would raise coal offerings in these exclusive auctions in order to satiate demand of the non-power sector. In turn, it would also help it to reduce the 56 mn t excess coal stock which is lying at its pit-head mines assessed at the end of Jul’21.
Leave a Reply