Coal news and updates

Upper bid for coal mines not to go over Rs.1,000 per tonne

The latest round of coal block auctions on Tuesday may see a drastic fall in bid rates compared with the bids made just a few months ago, showing a dramatic shift in the circumstances and sentiments surrounding natural resource auctions, one of the most ambitious projects of the National Democratic Alliance government.

“Bids are expected to be lower than the earlier rounds as international coal prices have come down and have a negative outlook for the medium term,” said Debasish Mishra, senior director at consultancy firm Deloitte Touche Tohmatsu India Pvt. Ltd. “Also these mines are non-operational mines that will take time to start production. Given the experience from the earlier rounds of bidding, bidders are expected to bid more rationally.”

The first two rounds of auctions held in February and concluded in March had metal and cement producers bidding aggressively, the highest bidder being Aditya Birla group’s Hindalco Industries Ltd at Rs 3,502 a tonne for the Gare Palma IV/5 coal field in Chhattisgarh.

Now, an analyst closely tracking the auctions said on condition of anonymity, said bids would be Rs 1,000 a tonne “at the maximum”.

Coal prices have fallen 10% since the start of the auctions. On Thursday, thermal coal, on free-on-board basis at Newcastle, was quoted at $60 tonne compared with $66.50 per tonne on 28 February. Amid falling prices, the abundant supply of coal the world over is also a bearish factor for the coal market.

Closer home, Coal India has boosted production and there is talk of investment in renewable energy, which has made coal look like a commodity that is not as scarce as it was seen to be before.

Companies such as Hindalco, Jindal Steel and Power Ltd and Vedanta Ltd will take part in the auction where the government will offer about 10 fields for companies that make products such as cement, aluminium, steel and iron, according to a Press Trust of India report. Of the 10 mines, six were offered earlier.

With this newest round, less than 100 of the 214 blocks that were cancelled by the Supreme Court last year would have been auctioned or allocated so far.

source: http://www.livemint.com