Domestic coal prices largely rangebound in central India despite declining in the west

Domestic coal prices in Wani, Maharashtra, dropped 11% m-o-m, as per CoalMint data. Prices of 4,500 GCV coal were recorded at INR 11,050/tonne (t) on 28 October, 2022. This decline can be attributed to improvement in coal supplies.

Meanwhile, in Bilaspur, Chhattisgarh, prices rose by 2% m-o-m amid limited stocks with traders. Prices of 5,000 GCV coal were assessed at INR 12,000/t on 28 October.

Why are prices falling in Wani?

In the last week of August, prices in Wani had jumped to INR 13,900/t on the back of supply shortage primarily due to heavy rains in July-August. Dispatches against bookings at the auction held by Western Coalfields Ltd (WCL) in June were delayed. In addition, there was no auction held in July.

To make things worse, dispatches to the power plants were also impacted during this time and WCL started to regulate supply for the non-power segment.

However, the supply situation improved gradually as WCL conducted consecutive monthly auctions from August. Moreover, increase in dispatches was recorded as the impact of heavy rains gradually subsided.

Another reason for the price fall was limited buying. Seasonal slump in demand during monsoon and slowdown in the iron and steel sector constrained demand for coal.

On the contrary, the Bilaspur market saw a marginal hike in prices induced by limited availability of coal stocks with traders, as the last auction was held on 29 August. Nevertheless, limited enquires de-motivated traders to opt for a steeper price rise.

Outlook

In the near term, traders at the resellers’ market are expecting a surge in demand as brick manufacturers resume their operations. On the supply side, the current rate of production and offtake during October is not encouraging. CIL’s production and offtake for October are expected to be around 52 mnt and 53 mnt, respectively.

A y-o-y comparison indicates that production will rise by around 2 mnt; however, dispatches are expected to fall by at least 3.5 mnt.

Nonetheless, higher supplies than production have contributed little to CIL’s inventory levels assessed at mines which fell to alarming levels. This suggests that the hand-to-mouth supply situation would continue unless there is a major ramp up in production.