In the wake of the Indonesian government setting the November average free on board (FOB) coal prices at $55.71 per tonne, up 9.2% from October’s FOB value, CIL has started talking to importers to find if they could meet their requirement through domestic coal.
CIL’s special spot e-auction for coal importers has been enouraging with 3.3 MT booked in November, fetching a premium of 21% against 14% in October.
With the Indonesian thermal coal prices surging, Coal India (CIL) is looking at an opportunity to replace imported thermal coal with the domestic variety going by the government’s mandate of 100 million tonne (MT) of import substitution.
In the wake of the Indonesian government setting the November average free on board (FOB) coal prices at $55.71 per tonne, up 9.2% from October’s FOB value, CIL has started talking to importers to find if they could meet their requirement through domestic coal. “We have already communicated with 300 importers seeking their requirement from domestic sources. The rising international coal prices in the last fortnight could offer CIL an opening,” a CIL official said.
The PSU miner, saddled with a stock pile of 91 MT in the system (53.5 MT at the pit heads and 37.5 MT at the power plants), is looking for newer avenues to push coal. Though demand from the power sector suddenly increased above 13% in October, it declined once again in November, and non-power gave the impetus lifting 12.3 MT, a growth of 46% y-o-y. This helped CIL’s y-o-y offtake to grow 8% in November. Substituting imports could further aid in offtake growth even if demand from the power sector remains muted.
Indonesian coal prices (FOB) at $ 67.09 per tonne in March this year slumped to its lowest at $49.42 per tonne in September this year, for which imports were upbeat despite the government’s efforts to bring it down. Although the Indonesian average coal prices for November, according to a Platts report, were down 15.1% y-o-y, considering the recent price trend the mark up in November has opened opportunities for CIL.
Indonesian coal prices are bound to move up further from December onwards as there are increased demand from China, Japan and South Korea. Besides the sky rocketing ocean freights might put importers at a disadvantage, which is where CIL is trying to capitalise.
CIL’s special spot e-auction for coal importers has been enouraging with 3.3 MT booked in November, fetching a premium of 21% against 14% in October. The quantity booked in November is twice that of 1.6 MT booked in October, when CIL for the first time introduced this window. So, targeting importers has yielded in e-auction sales with overall sales growing 77% between April and November. The five auction windows booked a total of 68.3 MT, which was 30 MT higher compared to the year-ago period.
Non-power consumers booked 17.4 MT from the exclusive auction, making 25.5% of the total allocated quantity for November. Bookings from non-power consumers rose 262% for April-November against 4.8 MT a year ago.
During November, e auction volume bookings were at 9.4 MT, clocking a 23.7% growth y-o-y, but it also fetched a 30% premium over the notified prices, a big leap from the 13% premium fetched in October.
“Considering the market response to e-auctions, there is a strong possibility that the bookings could go over 100 MT in the current fiscal. For now, the focus remains on volume expansion. Going forward, add-ons on the notified price in case of e-auctions will be pliable based on subsidiary-wise and grade-wise demand,” a senior CIL executive said.