Coal India’s e-auction prices for the solid fuel rises after 12 months

20 February 2017

Federal monopoly Coal India’s average e-auction prices for the solid fuel have risen after about 12 months, reflecting a hardening global trend in the costs of the energy source.

In the December quarter, average realisations from e-auction rose to Rs 1,546 per tonne, 17 per cent higher than the preceding three months, reversing a series of declines that had begun in April 2015.

Analysts expect prices to remain firm and aid Coal IndiaBSE -0.53 % improve its financial performance because of output moderation by large regional exporter Indonesia and revival of demand from smokestack industries in China, which had initially triggered global declines by shutting some coal-fired power plants.

Coal importer SPIML said international prices are expected to stay stable for the next few months: Imports from Indonesia into India and continued demand from China – key attributes in reversing price declines now – will likely continue, H Sethi, associate director at SPIML, told ET.

Coal India, based in Kolkata, is one of the world’s few miners of the fossil fuel that returns at a rate higher than its weighted average cost of capital, according to Bloomberg.

Through a raft of operating companies grouped by the geography where the monopoly mines, Coal India raised about 7 per cent of the world’s output in 2015, Bloomberg data showed.

Since April 2015, average prices fetched by Coal India from local auctions started to fall and in the subsequent 12 months, prices dipped by about 39 per cent from Rs 2,184 per ton in the quarter ended June 2015 to Rs 1,337 per ton during the quarter ended September 2016.

“Reasons for the fall included adequate stocks at power plants and non-power coal consumers, such as cement and fertilisers. International prices were also reflected in the auction prices, which were on the decline prior to July last year,” said a senior Coal India executive.

An analyst said: “Prices have increased as imported coal prices touched a peak in November and it makes sense for coal consumers to switch to domestic sources.”

Source – ET