Indian coal to see sales drop via electronic auctions
Coal India Ltd is expected to experience lower electronic auction sales due to increased supply to the electricity sector, which has been under pressure from declining inventories. The average achievement via the online auction platform, however, is likely to be much higher than last year.
The country’s largest miner had a total reservation of almost 120 million tonnes (mt) and sold almost 94 mt via electronic auctions in fiscal year 21. Sales by electronic auction represent about 15 to 16% of the total volume of coal sold.
According to Pramod Agarwal, president and CEO of CIL, the company would try to achieve sales of around 90 million tonnes through electronic auctions during this fiscal year.
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âLast year the total reservation was 120 million tonnes. We will try to reach that number, but it will be difficult to make a firm commitment at this stage because, I do not know how the demand for electricity will evolve. The expectations of the electricity sectors are very high. If their expectations turn out to be correct, then maybe that figure will be reduced, âAgarwal said on the conference call after the results.
From April to October 2021, CIL recorded a 24% increase in supplies to the electricity sector to 294 t compared to 237.8 t in the same period last year.
âIn October, the supply for this e-auction would have been less, due to the electricity crisis in the country and the decline in stocks in the power stations, we had to provide additional supplies to the power stations. In fact, in October, we supplied almost 56 tonnes to power plants, which is around 4 to 5 tonnes more than last year, âhe said.
Heavy rains in the first week of October also affected all shipments. Although CIL increased its supplies during the year compared to last year, most of the increase in supply went to power plants.
CIL obtained “very high premiums” for its offer on the online auction platform. This is mainly due to a constant demand for coal from the electric and non-electric sectors and to the strengthening of international coal prices.
The company, which was nearly 30 percent above its notified price in August this year, earned an average premium of over 45 to 50 percent in the last quarter. The average price realized through electronic auctions during the second quarter of fiscal year-22 was close to 1,569 per tonne.
However, according to Agarwal, it is not a question of premium but that of supply. âWhatever we offer, the premiums are very high,â he said.
Depending on the demand situation, the CIL injects a reserve price, which is essentially the floor price, in addition to the notified price, at which the auctions start. This is done according to the type of response received during the electronic auction and the amount of the premium collected. An improvement in premiums relative to the reported value is expected to increase the company’s bottom line.