Coal India Ltd (CIL) witnessed robust sales in the series of auctions it held in the month of September primarily for the non-power sector, which also fetched record bid premiums.
Domestic coal shortage along with soaring imported prices compelled buyers to raise their bids in the competitive market.
Due to the prevailing supply tightness offerings via the auction route were reduced to 5.08 million tonnes (mn t) during Sept’21, which is the lowest volume seen since Aug’19.
Nevertheless, the auctions received overwhelming response as 83% of the offered material was booked, thereby helping the miner to register its highest bid premium of 150% in the post-Covid era.
Notably, the allocated coal volume of 4.21 mn t was sold at an average price realisation of INR 3,856/t against the assessed notified price of INR 1,545/t.
Indicating strong demand, bid prices across some of the CIL subsidiaries were recorded in the range of INR 11,000-13,000/t (exclusive of taxes) which are at par with the prevailing imported port-side prices.
Scheme-wise auction results
The sudden rise in power demand has significantly reduced coal inventory at the plants, forcing CIL to divert additional volumes towards these units.
As a result, the non-power sector cried foul, hard-pressed for coal. To mitigate the situation, CIL subsidiaries overlooked the power sector for its monthly auction sales, focusing instead on increasing its offerings to the non-power sector in September.
Incidentally, coal volumes on offer were confined to the spot, exclusive and special spot schemes, whereas, no auction was conducted under the special forward auction for power producers during the month of September.
Quantity in Million Tonne | Prices in INR/t
It may be noted that power producers can also participate in the spot and special spot auctions. But, it is not clear whether they did participate in these categories in September.
The decision yielded favourable results for CIL as the entire volume in the exclusive auction earmarked for the non-power sector was sold out. Similar response was seen in the sole special spot auction held by Central Coalfields Ltd (CCL).
Uptick in bid premium was also registered in the spot auctions. In particular, the impact was more pronounced in the sales held by South Eastern Coalfields Ltd (SECL) which had garnered bid premium of 260% as buyers in central India went on a buying spree to compensate for the elevated imported prices.
Outlook
CIL is under pressure from the government to resolve the prevailing coal shortage issue, in particular of the power plants where inventory levels have fallen to critical levels.
It is expected that the miner would augment coal dispatches via the fuel supply agreement route, curtailing the volume meant for auctions. This move will continue to support domestic prices in the near term.
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