India: Domestic coal prices rangebound, supply concerns persist

Domestic thermal coal prices remain almost rangebound amid stagnant demand despite shortage in supplies, as per CoalMint assessment.

Low demand is being seen from the iron and steel industry and seasonal slump in the agro industries. Some small industries using small boilers are switching to alternate fuels like biomass pellets.

The price of 5,000 gross calorific value (GCV) run of mine (ROM) coal in Chhattisgarh’s Bilaspur was assessed at INR 12,000/tonne (t), unchanged w-o-w on 5 August, 2022.

In Bilaspur, prices have not declined in tandem with the drop in bid prices in recent auctions as coal dispatches have not yet started.

A trader source told Coalmint: “Normally dispatches take place two-three weeks after the auction. However, delayed dispatches are hurting us more as we have little or no material to supply.”

In addition, the situation was aggravated by the 9% fall in coal dispatches by CIL subsidiary South Eastern Coalfields Ltd. (SECL) in July, while SECL’s production fell 14% m-o-m.

Rains hit supplies in western India

A similar yet more severe situation persists in Wani, Maharashtra, where dispatches by the Western Coalfields Ltd (WCL) as well as production have been hit due to heavy rains. Coal dispatches stood at 2.55 million tonnes (mnt) in July, a decrease of 55% m-o-m, while production fell by 63% m-o-m to 1.65 mnt.

This has resulted in a hike in coal prices at the reseller’s market. The price of 4500 GCV ROM coal is up by INR 1,000/t w-o-w, at INR 13,000/t on 5 August.

Commenting on the situation, a trader source said, “Mines in Wani have been flooded by the overflowing Wardha river. But we are still waiting for proactive action on the part of WCL to restart production.”

No respite to non-power sector 

Coal India Ltd. (CIL) reported 11% y-o-y growth in production in July but this has not led to better coal availability through spot auctions as the government is still according priority to the power sector. This is borne out by the following facts: 

• The Indian Railways has decided to extend the facility of coal loading for the power sector on a priority basis till 31 August. The facility introduced in April was set to expire on 31 July.
• Mahanadi Coalfields Ltd (MCL) has decided that allocation of coal to the non-power sector under fuel supply agreements (FSAs) would remain at the trigger (minimum) level for August.

Amid shortage in coal supplies, speedy dispatch after auctions could provide relief to traders and end-users.