Coal India Ltd (CIL) witnessed robust coal demand in the series of auctions held during Dec’21, but the booked volume was comparatively lower than the previous month on account of lesser quantity being offered on sale.
The company had registered sales of 11.23 mn t (million tonne) coal via auction route in Dec’21, down 16% m-o-m from 13.32 mn t in Nov’21. Notably, the offered volume in these auctions was reduced to 12.37 mn t in Dec’21 against 19.47 mn t in Nov’21.
Fuelled by strong restocking demand from the power sector, CIL has regulated offerings via auction route in order to increase coal dispatches via Fuel Supply Agreement (FSA).
Overall quantity offered for auction sales have decreased 58% y-o-y to 137.25 mn t during the first 9 months of FY’22 (Apr-Dec’21) compared to 325.12 mn t in the corresponding period of FY’21.
Another reason for the lower offerings was the steep fall in inventory levels assessed at the pit-head mines.
The company has dispatched 481.8 mn t coal in the nine month period (Apr-Dec’21), outpacing its production level of 413.6 mn t. As a result, coal stock at mines has now come down to a new low of 31.9 mn t at the end of Dec.
Subdued power demand pull down bid premium
The auction sales saw bid premium over the notified price increased to 105% in Dec’21 against 84% in Nov’21. However, there was lack of support from the power sector.
Incidentally, the company had offered highest quantity of coal under special forward scheme. These auctions earmarked specifically for the power sector had earlier fetched higher prices in view of the acute coal shortage faced by the power producers.
But, with gradual build-up in coal inventory, there was lesser urgency shown by the buyers as indicated by the steady decline in bid premium which come down to 45% in Dec’21 compared to the highs of 174% seen in Oct’21.
Instead, spot and exclusive auction schemes received comparatively higher bid premium during the month on the back of steady demand from the non-power sector.
Scheme-wise Auction Summary
Auction prices to remain elevated
CIL has raised its production volume to keep pace with the surging demand, but any significant growth in coal offerings via auction is non-viable with peak summer season around the corner.
The power plants still running at coal inventories lower than normative levels would be on toes to replenish their stock, thereby leaving the non-power sector to remain competitive in the auction sales.
At the same time, talks of potential ban on Indonesian coal exports will put additional burden on domestic coal supplies which will prevent prices from falling.
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