South Eastern Coalfields Ltd (SECL), the largest coal producing subsidiary of Coal India Limited (CIL), has witnessed a revival in demand for coal sales carried out via the spot auctions for May.
A gradual rise in imported coal prices, driven by surge in vessel freight rates and global coal indices, prompted buyers to look towards cheaper alternatives, as proven by the company’s recent auctions, which saw a jump in allocation as well as premium received against the notified price.
For the auction held on 17 May ’21, nearly two-third of the total 1,500,000 tonnes (t) of coal being offered was sold, wherein allocations increased 36% month-on-month (m-o-m) to 991,560 t in May ’21 compared to 730,950 t in Apr ’21.
Also, indicating an improvement in the bid price, the allocated quantity was booked at a price realisation of INR 1,550.47/t during May ‘21, thus fetching a premium of 30% over the assessed notified price of INR 1,195.6/t.
In the previous month’s auction, a premium of 25% was registered against sales booked at a price realisation of INR 1,384.97/t.
Key findings:
With the upward correction in South African coal prices, domestic buyers showed renewed interest in the domestic variety in order to meet their short-term requirements of high GCV coal.
Notably, almost the entire volume falling under higher grades (G5 to G9), having a GCV almost equivalent to the South African material, was booked in the auction. Besides, these coal grades had garnered higher premium than the lower grades.
The highest bid price of INR 4,340.5/t (exclusive of taxes) was recorded for the superior G5 grade. But still the price remained substantially lower than the imported grade which is traded at around INR 7,400-8,100/t in the eastern ports.
Despite the recent downward correction seen in the freight rates, the landed cost of imported coal is likely to stay elevated for June shipments. It is expected that buyers in central India will be active in the auctions much to the delight of SECL which has ample of coal stock at present.
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