New Delhi: Falling coal stockpiles at Indian power plants could stoke demand for the fuel supplied by Coal India Ltd., helping spur output that has slipped year-on-year for the past three months.
Production by the world’s biggest miner in October fell 2% from the same month last year, while shipments dropped 3%, the company said on Tuesday. Both missed targets. Meanwhile, national inventories at power plants have fallen by almost half since hitting a record in April. Stockpiles were enough for 14 days of demand on average, though several plants were running with less than a week’s stockpiles, a level considered critical by Indian regulators, according to data from the Central Electricity Authority.
“The demand from the power sector continues to remain subdued, but it should start looking up now,” said Abhisar Jain, an analyst at Mumbai-based Centrum Broking Ltd. “Power plant coal stocks have been falling and good monsoons this season should boost industrial activity. We expect these to have a positive impact on coal demand in the coming months.”
The surge in international coal prices will also support Coal India’s efforts to displace imports of the fuel with domestic supplies, Jain said. Coal India reduced prices of higher grades of coal in May to compete with imports. Australia’s Newcastle coal, a seaborne benchmark in Asia, has more than doubled this year, ending last week at near $106 a metric ton, according to data from Globalcoal.
India’s power generators had stocks for 18 days of demand on average a year ago, and 26 days as of 4 April, when inventories peaked, according to CEA data that tracks 102 facilities. Twenty of those plants had stocks for less than seven days as on 1 November, the figures show.
Coal India’s October production of 43.51 million metric metric tons was 84% of its target for the month, while shipments at 43.04 million tons were 90% of the goal. The 274 million tons of production during the first seven months of the fiscal year to March 2017 is less than half the 599 million ton target for the year. Bloomberg