Domestic coal prices remained stable in Wani, Maharashtra, and Chhattisgarh's Bilaspur last week as the improvement in supply was complemented with rising demand.

Prices of 4,500 GCV coal in Wani stood at INR 7,700/t on 3 March, while 5,000 GCV coal was assessed at INR 7,700/t in Chhattisgarh's Bilaspur, unchanged w-o-w.

Surge in supply

In the past two months, South Eastern Coalfields Limited (SECL) and Western Coalfields Limited (WCL) have increased the amount of coal they were offering via spot e-auction. In addition, both the miners have conducted two spot auctions in February. In January- February 2023, SECL offered 4.5 million tonne (mnt) of coal, a nearly 200% increase in volume over November-December 2022.

The amount of coal WCL has offered in the said period through spot e-auction is 0.88 mnt, which is around 60% more than what it offered in November- December 2022.

Why prices have not fallen?

The bid premium over notified prices has not decreased despite the rise in supply. It was 180% on December 2022's auction, while in January 2023 the bid premium was 278%. The bid premium was 208% on 7 February, and 251% on 21 February.

The bid premium has not fallen as increases in supplies were absorbed by bookings from end users for stocking before summer.

CoalMint observed that almost the same set of producers procured G11 and G14-G15 coal, which was the highest in SECL's offering, for blending coal of these two grades suitable for power generation.

However, the offering of mid GCV coal has increased since the last auction, for which supplies are awaited.

For WCL, despite the increase in offerings via spot auction, there is pendency in dispatches from mines, resulting in supply-demand disparity.

Increase in demand

During this time of the year, the production and stocking of final products is at its highest for the industries that are affected by rain. There is an increase in demand of coal from these industries.

Furthermore, the agro-industry typically becomes active following the harvest of the rabi crop. However, the biggest surge in coal demand continued to come from brick manufacturers.

In addition, traders from Chhattisgarh have indicated that there was an increasing procurement from captive power plants in the resellers' market.

Outlook

Prices are likely to drop in the near future due to an anticipated increase in supply. Significantly, March is the month when coal production generally peaks.