South Eastern Coalfields Ltd (SECL) concluded the spot auction of 0.46 million tonnes (mnt) of non-coking coal scheduled on 29 August 2022, where the entire quantity was booked.
The grades on offer were in the range of G5 to G10, G13 and G16, of which G6 and G10 material accounted for the highest quantity at around 100,000 tonnes (t) each.
The auction fetched bid premium of 365% over the notified price, while in July, the premium was recorded at 413%. This decline was recorded despite the fact that coal offering in the auction was reduced to half compared to the July auction.
The highest fall was recorded in the high CV band consisting of G5 and G6 coal which were offered in ample quantity. But bid prices for these grades fell by 9% and 13%, respectively. On the other hand, price of low-CV G13 coal rose by 26% as it was offered in limited quantity.
Why did bid premium fall?
The primary reason for the fall in bid premium was lower participation from the power sector.
Notably, the power plants procured a mere 1,000 t of coal in the auction as compared to the bulk of 160,000 t recorded in the previous auction.
This came after these plants have accumulated adequate inventory and are relying on supply through fuel supply agreements instead of costlier coal procurement via the auction route.
Nonetheless, increased participation from traders suggests an encouraging sign for the near-term availability in the resellers market. Traders booked almost two-third of the quantity offered in the auction.
Healthy booking was seen from sponge iron producers post-monsoon. This sector recorded coal procurement in excess of 100,000 t for the second successive month.
Mine-wise analysis
- Mines which received bid prices above INR 10,000/t were Vijay West, Kumda New, Rajgamar and Gayatri.
- Except Amagoan and Balrampur projects, all mines registered a fall in bid prices.
- Balrampur UG bid prices rose to 26%.
Outlook
In the near term, bid prices in the auctions are expected to fall as supply to the non-power sector would gradually increase.
Earlier, the government had prioritised supply to the power sector amid lower coal stocks at power plants because of the surge in power demand during summers. But now that power plants’ coal inventories are at a comfortable level, allocation to non-power sector is likely to increase.
In addition, the receding of monsoon would revamp coal production. However, the price fall is likely to be gradual as coal supply would take some time to normalize.
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