Coal news and updates

Possible imported coal price hike influencing bids

February 25: Companies bid aggressively in the just-concluded coal e-auctions and this trend may persist in the future auctions till March 31, 2015, on the back of expectations that imported thermal and coking coal prices are likely to rise by $30-40 per ton in the next 4-5 years, an informed source told ICMW.

“The present FOB prices of Australian coking coal, at $110-115 per ton, are likely to go up to $145-150 in 5 years’ time,” the source said, adding that there are some key reasons for the likely rise in imported coal prices.

“First, China is shutting down a few of its unprofitable mines but this is getting compensated through the opening up of new mines in Mongolia. Large and old Australian mines which are not able to produce at competitive prices are likely to shut down and may be replaced by newer coal mines which have lower costs and may remain viable. Similarly in Indonesia, several mines producing low grade coal are likely to disappear as the present prices do not justify their continuing production,” said the source, implying that there could be supply constraints in the international markets in the long term.

“Thus, those who are basing their calculations on the imported coal prices rising by $30-40 per ton in 4-5 years have done their homework and have thus taken calculated risks. Whether, the risks were justified or not, would depend on how the price of end product moves in these intervening years,” the source said.

Meanwhile, the government has put off the second round of auction of 21 coal blocks to early next month. The auction of mines in the second tranche was earlier scheduled to begin from February 25. "The auctions (of the second lot of coal mines will) begin on March 4," a coal ministry official said.