India: SECL's latest auction witnesses drop in coal bid prices

• Nearly 1 mnt coal booked in recent SECL auction
  
  
• BALCO remains largest bidder with 97,000 t
  
  

South Eastern Coalfields Limited (SECL) conducted another coal auction on 27 November 2024, in which a total of 967,750 tonnes (t) were allocated. This auction saw a significant increase in allocated volumes compared to the previous auction on 25 November, which had seen only 296,850 t allocated. The higher allocations in the latest auction suggest improved supply conditions for several coal grades.

Allocated volumes increase

The total volume of coal allotted in the 27 November auction rose significantly to 967,750 t from 296,850 t compared to the 25 November auction. This increase was driven by a wider variety of coal grades being offered, including G-12, G-6, and G-8, which saw higher volumes compared to the 25 November auction. On 25 November, only 19.7 million tonnes of coal were offered, whereas on 27 November, 61.67 million tonnes were made available, reflecting a more diverse supply.

Bid prices fall against last auction

G-6 grade: The 27 November auction saw 110,750 t of G-6 being allocated at an average winning price of INR 1,508/t, which is significantly lower than the INR 3,917/t secured in the 25 November auction. This indicates that while G-6 remains in demand, buyers were able to secure it at more competitive prices.

G-8 grade: This grade fetched an average winning price of INR 1,974/t on 27 November, down from INR 4,004/t in the previous auction. Despite the price drop, the volume of G-8 allocated increased to 89,900 t, up from 46,850 t on 25 November. This reflects a balanced demand for this grade, even as prices softened.

G-12 grade: The introduction of G-12 brought down the average winning price further, as it fetched only INR 1,590/t on average. This grade, which was not offered in the 25 November auction, saw 400,000 t allocated, contributing to the overall increase in supply and lower average prices.

Top bidders

The 27 November auction witnessed some of the biggest players in the industry emerge as the highest bidders:

• Bharat Aluminium Company Limited (BALCO): The largest allocation, 97,000 t, went to BALCO, reflecting its strong coal demand for aluminium production.
  
  
• Refex Industries Limited: Secured 90,450 t of coal
  
  

Outlook

While the 27 November auction saw higher allocations, the drop in average winning prices suggests a shift in market sentiment, with buyers being more cautious about price expectations. The increased supply of lower-grade coals such as G-12 and G-6, alongside some price corrections in G-8 and G-6, may indicate that coal producers are trying to balance demand across different grades while maintaining competitiveness.

The participation of major players like BALCO, Refex Industries, and DB Power further reflects the essential role of coal in key sectors like aluminium production, power generation, and industrial manufacturing.