Coal prices in resellers market remained at elevated levels in H1CY22. In April, price of 5,000 GCV ROM coal in Chhattisgarh’s Bilaspur went up to INR 15,250/tonne (t). The same was assessed at INR 11,250/tonne on 15 June 2022, unchanged w-o-w. Meanwhile, prices are range bound as market variables are stagnant. A further fall in prices would ease the cost pressure on industries.
It is pertinent to note that coal traders procure the raw material through e-auction of Coal India Limited (CIL) and sell it in the open market or resellers market. And prices in resellers market are largely influenced by bid prices CIL’s auctions, quantity offered by the company and end users demand.
What was the trend in H1CY22?
Coal prices in resellers market saw a steep hike in tandem with rising bid prices at e-auctions in the first half of 2022. Notably, the coal volume offered via e-auction by CIL in H1CY22 dropped by 51% y-o-y to 34 mnt.
As a result, average bid premium for auction sales jumped to 274% in H1CY22 as against 30% in H1CY21.
The abrupt rise in prices had an adverse impact on production costs and industries started to procure only limited quantity. In addition, demand for coal fell further with the onset of rainy season as industrial activities slowed down. This brought down coal reselling prices marginally.
Price scenario for Q3CY22
The most important variable that will define the price movement is coal supplies. Currently, the traders are holding very limited stock.
A trader in Bilaspur, Chhattisgarh said, “SECL’s last auction was held in 5 May and it has been more than two months. We don’t have any stock left to sell.”
The supply issues persisted even in case of subsidiaries which have conducted auction recently. A trader in Wani, Maharashtra informed CoalMint, “We have not received coal delivery even after 15 days of the auction as dispatches and production get hamper during rainy season.”
However, traders are not expecting any significant fall in bid prices. “There may be a marginal correction in prices amid seasonal fall in demand during monsoon,” another trader said. For significant fall in bids, coal supply from CIL has to increase, he added.
CoalMint observed that coal dispatches in the first fifteen days of July (1-15 July) increased by 6% y-o-y to 26.85 mnt. In the same period, production was up 8% y-o-y to 22.88 mnt. On the other hand, daily power demand during 1-13 July also increased by 4% y-o-y to 4,205 million units (MU)/day.
It is expected that CIL will continue to priorities power sector for coal supplies in anticipation of increase in power demand post-monsoon.
In the near term, coal offering from CIL is expected to remain low and any considerable change in prices seems unlikely.
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