State run miner Coal India Ltd (CIL) has witnessed a correction in bid prices for coal sales concluded via spot auctions in June 2022 as buying activity took a hit by the impending arrival of monsoon.
The company fetched a price realisation of INR 7,308/t in June auctions which was 357% higher than the notified price of INR 1,600/t. The premium in May auctions was recorded at 425%.
The ongoing supply tightness led by disparity in coal dispatch resulting from soaring power demand kept bid prices at elevated levels. However, bids inched down due to gradual slow-down in industrial activities in the rainy season.
Subdued buying was also supported by reduced participation from traders which either opted to remain on the sidelines or lowered their bids after struggling to sell the quantity that was booked in the previous auctions at higher prices.
In addition, the decline in global prices provided buyers an alternative source for coal procurement as they made a final push to meet their restocking need before the monsoons.
Hefty price fall in MCL auction
The auction sales comprise variety of coal grades put on sale by individual subsidiary.
In June 2022, CIL’s largest coal producing subsidiary Mahanadi Coalfields Ltd (MCL) recorded a steep fall in bid premium to 450% from 749% in May 2022.
Bid prices for lower calorific value (CV) coal in range of G12-G14 dropped by INR 2,300-3,600/t. In mid CV band, a single lot of G8 comprising a small volume of 8,000 t, was booked at the floor price of INR 2,122/t. Coal of this grade fetched an average price of INR 9,174/t in the previous month.
MCL coal prices in auction
Prices in INR/t, exclusive of taxes.
The price correction was noted for high CV coal too. Notably, premium grade-G4 offered by Eastern Coalfields Ltd (ECL) received a price realisation of INR 14,123/t in June, which was around INR 1,150/t lesser than the bids in May.
No improvement in coal offerings
CIL has posted a steep rise of 29% in coal production in Q1FY23, thereby boosting the government’s efforts to meet the country’s growing energy needs.
However, some of these subsidiaries are not conducting auctions on a regular basis. In June 2022, Central Coalfields Ltd (CCL) conducted an auction for the first time in FY23, but companies like South Eastern Coalfields (SECL), Northern Coalfields (NCL) and North Eastern Coalfields (NECL) were absent.
Total coal offered in these auctions was down 8% m-o-m to 4.03 mnt in June compared to 4.4 mnt in May.
The curtailment in coal volume for auctions is likely to continue in the next quarter to compensate for the expected production loss during monsoons at a time coal supplies to the power sector are a priority.
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