CoalMint’s India Coal Index (ICI) witnessed an uptick in high grade specification during September, 2022 as buyers increased bids to procure the minimal material available for sale. However, not much support was seen for the other specifications.
The monthly weighted price of high-grade coal of GCV 5500 increased by INR 1,034/t m-o-m to INR 8,957/t in September. This contrasts sharply with the downtrend seen in the remaining indices, while a marginal rise was recorded in low-grade GCV 2600 during the month.
The price index, comprising of five distinct specifications, is formulated by integrating various non-coking coal grades floated in the regular auctions conducted by Coal India Ltd. (CIL) subsidiaries. The index follows the movement of bid prices received against the relevant grade baskets.
It is imperative to note that the subsidiaries have gradually increasing their offerings via the auction route in tandem with improvement in power plant inventory levels. However, bulk allocation was carried out by Mahanadi Coalfields Ltd (MCL) that majorly offers coal in moderate low-grade specification.
This, coupled with inconsistency shown by some subsidiaries towards conducting auctions, are impacting the product mix. As a result, buyers expedited their efforts to book domestic grades equivalent to imported material at a time global prices are still elevated.
No improvement in supplies to non-power sector
Disparity in coal supplies to the non-power sector continued as CIL continued to prioritise the power plants. This is further supporting competitive bidding in the auctions.
In September 2022, the non-power sector was supplied 7.34 mnt of coal by CIL, down 13% y-o-y against 8.44 mnt in September, 2021. On the other hand, supplies to the power sector increased 4% y-o-y to 41.54 mnt.
This came as power demand saw a double-digit growth in September, after a brief spell of slowdown during July-August.
Outlook
Early trends in October indicate that CIL’s present pace of dispatches is lagging behind year-ago levels but is still higher than the production levels.
This would further deplete the inventories assessed at the mines, which have been steadily falling on account of higher dispatches. At the end of September, the inventory had dropped below the 30-mnt mark for the first time since December, 2019.
Under these circumstances, it is likely that the subsidiaries will continue to curtail offerings via auctions, thereby lending support to prices in the short-term, especially when the end-user industry resumes restocking activity the post monsoon-hiatus.
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