Coal India Ltd (CIL) has witnessed a correction in bid prices for coal sales concluded via spot auctions for the second consecutive month in July, 2022.
Bid premium was assessed at 290% over the notified price in July. In May and June, the premium was assessed at 425% and 357% respectively. This drop is attributed to seasonal fall in demand with the onset of monsoon despite reduced offers.
Coal offering falls further
The company had offered 2.66 mnt of coal in July, 2022 where almost entire quantity was booked. The coal was allocated at a total price of INR 2,161 crore (exclusive of taxes), thereby garnering an average price realisation of INR 8,120/t.
It is to be noted that offerings in spot auctions are being curtailed in view of escalated demand from the power sector. In July auctions, the offered volume was further reduced compared to the previous months.
The reason for the steep decline in material offering was the absence of CIL’s largest coal producing subsidiary Mahanadi Coalfields (MCL). In fact, only four subsidiaries held the spot auctions in July.
The offered volume in May and June was 4.4 mnt and 4.03 mnt respectively.
South Eastern Coalfields Ltd (SECL) offered the highest quantity of 0.86 mnt followed by Eastern Coalfields (ECL) at 0.78 mnt in the month. Other subsidiaries that held auctions were Bharat Coking Coal Limited (BCCL) and Northern Coalfields (NCL).
Bid prices still at elevated levels
Despite the correction, bid prices are still at the elevated levels as compared to last year amid supply tightness.
In July 2021, CIL offered 15.86 mnt of coal of which 8.26 mnt was booked at a bid premium of 40% over the notified price. Notably, the booked quantity in July this year was 68% less y-o-y but bids rose by 42% y-o-y.
Bids fall in SECL, ECL auctions
In the SECL’s July auction, 867,000 t of coal was booked at a price of INR 565.7 crore (exclusive of taxes), with an average price realisation at INR 6,525/t. Bid premium was 413% higher than the notified price. In May, the average realisation at spot auction was INR 7,853/t and the bid premium rose by 495%.
Meanwhile, in the ECL auction, bid premium fell marginally as compared to last auction held in May and June. Bid premium was 262% over the notified price.
BCCL bid premium rises
BCCL offered 0.38 mnt of coal and almost the entire quantity was booked. Bid premium was 131% over the notified price. Contrary to other subsidiaries, BCCL saw an increase in bid premium this month. Bid premium for June and May was 103% and 116% respectively.
Meanwhile, NCL conducted the auction after two months. Bid premium received was 131% over the notified prices for 0.63 mnt of coal booked.
In the near term, coal offering through spot auctions would continue to remain low despite 11% increase in CIL’s coal production in July as the state-run coal miner would continue to prioritise supplies to the power sector.
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