Informal sector steps up coal stocking over price concerns

NEW DELHI: India's vast informal industrial sector using coal is cautiously building buffers, with brick kilns, small foundries and other smaller energy-intensive units gradually stockpiling the fuel in anticipation of a price increase triggered by global price pressure amid the West Asia crisis.

Industry participants said the trend picked up over the last one week as these units, typically operating outside long-term fuel linkages, now anticipate higher spot prices led by international coal prices. The stocking is, however, gradual and limited because of constraint in storing capacities.

Coal prices have risen internationally and percolated to the free market rates for coal clocking a premium of 10-15% over the usual rates during this time of the season, coal traders said.


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A news report from S&P Global Energy on March 23 said that the Platts CFR India 4,200 kcal/kg GAR rose from $67/mt on Feb 27 to $77.40/mt on March 20, supported by stronger buying interest in parts of Asia and firmer energy market sentiment.

Rahul Rungta, director of Kolkata-based trading firm BK Coal, said "Clients are stockpiling their requirement because imported coal prices are increasing and there is an anticipation of supply disruption in imported coal. Though rates are not very high as of now, there is an expectation in the market."

However, domestic production and availability remain robust with Coal India's notified price remaining unchanged. The Centre has already written to states to ensure that coal prices are not increased and there is ample availability to meet any increasing demand. Coal stock in the country is currently at 224 million tonnes compared with 201 million tonnes last year.

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In the March e-auctions of Coal India the average price realized exceeded its notified price by 45%, against 35% in February, due to seasonal demand as well as reflecting some of that higher demand in the market, industry participants said. This is a seasonal buying period for brick kiln operators in states such as Uttar Pradesh, Bihar and Punjab which ends around May-June.

"We are now keeping more stock than usual as we understand that prices may rise further. But kilns have limited fuel storage capacity," said Satyam Kesarwani, owner of Prayagraj-based Ghoorpur Bricks. "We will have to take the higher priced coal eventually, if rates continue to rise."