PSU miner Coal India Ltd (CIL) has struggled to allocate adequate coal via e-auctions primarily due to supply priority accorded to the power sector. Meanwhile, continual infusion of more of lower-grade material for sale has been another reason for the country’s renewed interest for imports this year.
Total allocation via e-auctions, which constitutes around 20% of CIL’s sales, dropped 52% y-o-y to 60.51 million tonnes (mnt) in CY22 as against 126.2 mnt in CY21. Notably, bulk allocations are made up of long-term contracts signed under fuel supply agreements (FSAs).
Based on the grade-wise segregation of non-coking coal formulated for computation of CoalMint’s India Coal Index (ICI), it was found that CIL’s sales via auction is largely concentrated around lower grade material.
In fact, booked volumes across premium and high specifications, comprising G1-G7 coal, were only 19% of total sales in CY22. Although share of these grades has increased as against 7% in CY21.
CIL Grade-wise Coal Allocation
Quantity in mnt | Compuatation made as per India Coal Index.
Interestingly, premium grade coal recorded an improvement in sales y-o-y on absolute basis, boosted by resumption of mining activities at North-Eastern Coalfields which is amongst one of the few producers of quality material.
Despite abundant domestic coal reserves, India significantly lacks in availability of premium grade material. However, the steep decline in bookings of medium grade specification coal during CY22 is appalling given the fact that almost 60% of CIL’s production lies in this basket.
Share of medium grade against total allocation has dropped to 26% in CY22 compared to 49% in CY17. On the other hand, majority of 43% allocation for CY22 was seen across the moderate low specification comprising of G12-G14 material.
Renewed interest for imports
Scarcity of domestic coal combined with allocation of inferior material in e-auctions pushed Indian buyers to scour the global market for quality material.
As per CoalMint data, imports of non-coking coal imports jumped 15% y-o-y to 161.94 mnt in CY22. This holds significance as the rise in imports ended the successive decline recorded for the past two years.
On global clues, imported coal prices have witnessed sharp correction. This is likely to incite buyers to increase seaborne purchases. In a significant development, the government has issued new guidelines for imports to the power producers to ensure smooth operations at thermal power stations ahead of the peak summer season.
On the domestic side, CIL is ramping-up production in the final quarter of fiscal.
However, the possibility of fresh supply disruption for the non-power sector cannot be ruled out owing to logistics constraints along with higher demand from the power sector due to which lower allocations via auction will continue in the near term.
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