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Auction sales prove a silver lining for Coal India

31st May 2016

By: Ajoy K Das

Creamer Media Correspondent

  

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KOLKATA (miningweekly.com) – Faced with mounting stocks and depressed demand, e-auctions have proved to be a silver lining for Coal India Limited (CIL).

By increasing volumes through e-auctions, the miner was able to boost sales by $373-million during the 2015/16 financial year. CIL sold 58-million tons of coal under e-auction, which was 11% higher than that offered in the previous financial year, according to public statements issued by the company.

With e-auction rates averaging about 33% higher than the “notified price” of CIL sales to thermal power plants under negotiated deals, the miner was planning to ramp up e-action sales to about 120-million tons in the current financial year, to sustain earnings during the demand downturn and rising production.

Power developers with fuel supply agreements have raised concern about supply, arguing that CIL had to first meet its contracted agreements to the full, before diverting coal to the more lucrative e-auction platform. The company has responded that higher volumes on e-auction would not impact on supply to existing customers with long-term agreements, as production from its mines was higher and demand from power producers was significantly lower. The average thermal power plant load factor was as low as 60%, CIL stated.

Buoyed by higher prices fetched at auctions, CIL has launched special e-auctions for sub-sections across industries, starting with sponge iron producers in the steel industry.

In the first tranche, CIL would offer two-million tons of coal supply linkage to sponge iron units, with e-auctions starting on Tuesday. In subsequent tranches, a total of 28-million tons of coal linkage would be auctioned to companies in the iron, steel and cement industries whose final product was not under any government pricing regime.

Edited by Mariaan Webb
Creamer Media Contract Publishing Editor

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