India: Thermal coal prices in reseller’s market fall marginally

Thermal coal prices in the reseller’s market have continued to fall under the impact of the seasonal slump in demand. However, the decline was limited as traders are unwilling to offer steep cuts.

Price of 5,000 GCV ROM coal in Chhattisgarh’s Bilaspur was assessed at INR 11,250/tonne (t), marginally down by INR 250/t w-o-w on 7 June 2022.

The traders had bought coal from e-auctions at elevated prices due to which they did not have much room to drop prices steeply. Nonetheless, weak buying interest resulting from the arrival of the monsoon has compelled the traders to reduce offers.

Slowdown in industrial activity during the rainy season majorly affects operations at thermal power, sponge iron, and cement plants. Besides, brick manufacturers also cease to operate in this period.

Bid prices fall in fresh auctions but supply tightness persists

Coal India subsidiaries Mahanadi Coalfields (MCL) and Western Coalfields (WCL) have recorded a fall in bid prices for sales via the recent spot auctions.

MCL’s auction on 30 June fetched a premium of 450% over the notified price compared to 749% in May.

On similar lines, WCL’s auction, held on 29 June, fetched a premium of 185% over the notified price, while in May the bid premium was 221%.

• Average weighted bid price of G10 coal was INR 7,142/t, a fall of INR 1,100/t from the last auction.
• Average weighted bid price of G8 coal was INR 8,549/t, a fall of INR 532/t from the last auction.

Traders in Wani, Maharashtra procure coal via WCL. Post-auction, the prices at the reseller’s market in Wani for 4500 GCV ROM has slightly dropped by INR 500/t to INR 11,500/t.

Meanwhile, supply tightness persists as dispatching of material booked in the new auctions will take time because mining activities get disrupted during the rainy season.

What’s next?

Thermal coal prices in the reseller’s market are expected to further decline in the near term because of the following reasons:

• There is a fall in bid prices in recent auctions and the same is expected in the upcoming auctions as coal demand remains sluggish during the rainy season.
• In addition, India’s thermal coal imports surged to an all-time high of 21 mnt in June 2022, an increase of 40% m-o-m. This will ease the pressure on domestic thermal coal.
• An increase in the earnest money deposit (EMD) rate by CIL is expected to curb speculative bidding and force coal traders to bid wisely.