Domestic coal prices in the reseller’s market fell in the current week after being stable in the week before. Wani, Maharashtra saw a drop of 6% w-o-w while in Chhattisgarh’s Bilaspur, the drop was 4% w-o-w.
The underlying cause for the fall in prices was limited demand, which forced traders to slash the offers which they held on to last week.
Wani: Prices fall in line with bids
The prices of 4,500 gross calorific value (GCV) coal in Wani, Maharashtra, were down by INR 825/tonne (t) w-o-w to INR 12,475/t on 23 September. Nevertheless, prices are up by INR 200/t m-o-m.
Subdued demand in the market has put selling pressure on the traders. The decline in bid prices in the recent auction by Western Coalfields Limited (WCL) left the traders with no choice but to lower their offers. This forced them to operate at lower margins as they had booked coal at higher prices in the previous auctions.
It seems traders wanted their stocks to move even though these had been bought at higher prices in the previous auction since dispatch orders against booked volumes in the auctions would take 3-4 weeks to initiate. They wanted to cash in on this delay.
A market trader told CoalMint, “We have to cut our offers as there are very limited inquiries.” He added, “We are perhaps incurring losses in the short term but, in the long term, the fall in bid prices will lead to increased demand.”
Bilaspur: Limited buying pushes prices down
The prices of 5,000 GCV coal in Chhattisgarh’s Bilaspur were assessed at INR 11,800/t on 23 September, a drop of INR 500/t w-o-w.
Similar to Wani, Bilaspur market saw dull buying sentiments from the major coal consuming sectors like power, cement, sponge, and steel. On the other hand, traders are not expecting increase in coal demand as brick manufacturers are not expected to procure coal in the near term.
A trader from Bilaspur informed Coalmint, “There will be no demand from brick manufacturers for at least a month because of continuation of rains.” It is to be noted that brick manufacturers start to operate only 30-40 days after the end of the rainy season.
Outlook
In the near term, prices in the reseller’s market are not expected to increase because of limited buying.
An abrupt rise in coal prices, supported by a mismatch in supply-demand, has impacted margins of end-users and they are finding it difficult to keep their operations running at current levels. At the same time, traders are also facing limited buying due to the soaring prices.
In this scenario, price correction induced by improved supply would be a win-win for both the parties.
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