India: Domestic coal prices stable in resellers’ market as demand fails to take off

Domestic coal prices remained unchanged amid the fall in demand and traders’ reluctance to reduce their offers. As per CoalMint’s assessment, prices of 4,500 GCV coal in Wani, Maharashtra remained unchanged w-o-w at INR 10,000/tonne (t) exw on 2 December, 2022. Similarly, prices of 5,000 GCV coal in Bilaspur stood at INR 10,500/t exw, stable w-o-w.

Fall in demand

Market participants have informed Coalmint that there was a fall in coal demand in November as compared to October. This trend is unusual, because traditionally demand increases after Diwali and the kharif season.

Meanwhile, despite the removal of the steel export duty, inquiries for coal from the iron and steel sector have not increased.

“Our major customers are from the lime and cement industries, and inquiries from their side have taken a dip,” a trader informed Coalmint. He further added, “Many lime producers have closed their operations because of high production costs induced by high coal prices and limited buying.”

Coal requirement from brick manufacturers has increased, indicating signs of improvement. However, this is still assessed to be lower as compared last year.

Traders’ reluctant to reduce offers

In Wani, traders are unwilling to drop offers despite low demand. “There has been a fall in coal prices for the last three months, and we are always under pressure to reduce the offers,” a trader explained to Coalmint.
He further added, “Because of the continuous fall in bidding prices in WCL auctions, we have to sell unsold stock at lower offers, resulting in losses.”

Meanwhile, in Bilaspur, traders are holding on to the offers despite the fall in bid prices in the recent auction as they are waiting for supplies to resume in the latest auction.

Outlook

On the supply side, there is optimism regarding production and offtake. CIL (Coal India Ltd.)has achieved its monthly production and dispatch targets for November. CIL’s production last month stood at 60.7 mnt, up by 13% y-o-y and offtake stood 59.3 mnt , a rise of 4.6% y-o-y.  Therefore, prices are not expected to increase.