Domestic miner Coal India Ltd (CIL) has managed record bid premiums of 232% for coal sales via a series of spot auctions that were held in Jan’22. The booked quantity in these auctions was sold at an average price of INR 5,912/t against the assessed notified price of INR 1,781/t.
This scheme is open to all categories of coal buyers, including traders, but the offered volume in Jan’22 decreased 38% m-o-m, to 2.81 mnt. Consequently, aggressive bidding was seen as the buyers were in a rush to procure the limited material that was put on sale.
Indian buyers were put in a tight spot in view of the limited cargo availability resulting from the ban on coal exports imposed by the Indonesian government. In addition, not much help was seen from CIL as well.
On its part, the company had offered a total of 16.97 mnt of coal against the series of auctions held in Jan’22, which was 37% higher m-o-m compared to 12.37 mnt that was put on sale in Dec’21.
However, extending its support to the power sector, bulk volume of 13.74 mn t was allocated in the special forward scheme of auctions which is earmarked only for the power producers. Besides, a minimal quantity of 0.42 mnt was put on sale against the exclusive auction scheme which is marked only for the non-power sector.
Price disparity
While prices in the spot auction were soaring, a rather dull response was seen in the special forward scheme as apart from the bulk allocation via the auction route, the power producers’ coal supplies were also bolstered via the fuel supply agreement (FSA) route.
As a result, there has been a steady decline in bid premiums for the special forward scheme compared to the highs of 174% seen in Oct’21. In Jan’22, the premium was recorded at 36%.
SECL auction prices
Prices in INR/t
A comparative analysis of the sales concluded by CIL subsidiary South Eastern Coalfields Ltd (SECL) showed that bid prices in case of spot auction for various coal grades were in excess of INR 17,00/t over the reserve price.
In contrast, bids in the special forward scheme were dismal. Apart from gain of INR 1,186/t over the reserve price for G9, bids for the remaining grades progressively decreased. In fact, the lower calorific value grades were sold almost at the base price.
The trend is expected to continue, supported by the preference given to the power sector especially when coal inventories at the plants are below the normative levels. On the other hand, supply to the non-power sector would remain disrupted but would ease to an extent with increased production.
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