Coal India sees rising import costs helping to trim stockpiles

Increasing Australian and South African prices have made imports more expensive, which may boost demand for domestic coal


Photo: Bloomberg
Photo: Bloomberg

New Delhi: Coal India Ltd (CIL), the world’s biggest producer of the fuel, sees rising international prices helping it shrink swollen stockpiles and gain more buyers as domestic customers shun imports in favour of local supplies.

Increasing Australian and South African prices have made imports more expensive, which may boost demand for domestic coal, said marketing director S.N. Prasad. Thermal coal in Australia jumped about 25% in the past two months, while South African coal prices rose about 15% during the period, buoyed by production cuts and a recovery in imports from China, the biggest consumer.

“The bounce-back in international prices is a good omen for us,” Prasad said. “If the trend continues, we could see several customers switching from imports to us.”

The Kolkata-based miner is seeking to tap new customers to cut inventories at its mines after production grew faster than demand. The company reduced prices of higher grade coal in May to compete with imports and woo back customers. The increase in imported prices will complement that effort, said Goutam Chakraborty, a Mumbai-based analyst at Emkay Global Financial Services.

The state-owned company’s production in the three months ended 30 June rose 3.5% to 125.65 million metric tonnes, compared with a 2.9% growth in shipments to 133.19 million tonnes.

The miner, which controls more than 80% of the nation’s coal production, has managed to reduce inventories to around 46 million tonnes from about 53 million a couple of months ago, according to Prasad.

Coal India is also in talks to ship coal to Bangladesh in what could be its biggest overseas deal, Prasad said. The company is looking to supply coal to a 1,320 megawatt power plant that NTPC Ltd plans to build in that country. Reuters

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