Muted Demand For Coal Pulls the Coal Prices Down On Improved Coal Production.

Coal prices can be affected by several reasons including the availability of raw materials, the demand for the power and steel industry, the state of the global economy, and others. In November 2022, the amount of coal put up for e-auction by various CIL subsidiaries reached an 8-month high of 5.90MT. This spike in production followed the monsoon season, with CIL reporting a 13% increase in coal production YoY to 60.9MT in November, up 15% from the month before.  The supply is not an issue, what matters is the demand fails to pick up as winter approaches in many regions of India, it appears that the demand for coal from the power sector has decreased. A lack of motivation for purchasers to improve their bids has resulted from the persistent decline in coal prices and restricted buying from dealers who are being cautious owing to price volatility. Due to the current pricing levels being outside their operational margins, some end-user sectors have even curtailed their purchases, and brick and cement manufacturers have seen poor replenishing demand. Overall, there seems to be a dull market for coal in the current situation.

To make up for the high summer season, the government is seeking to boost coal inventory from its present level of 30.45MT to 44.80MT by March. Given that the miner will continue to give priority to supplying the power sector, this means that there are few odds of a major increase in the coal offerings at auctions. As a result, a sharp decrease in coal prices is not anticipated; rather, the price movement will probably be influenced by how end-user industries perform over the next few months.

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