By Niraj Chinchkhede :
As soon as the industrial activities across the world started resuming after a long lull due to COVID-19, demand for many commodities jumped all of a sudden. The surge in demand for many commodities was well anticipated by the market observers and so was the rise in its prices. However, the recent hike in coal prices was not in line with the imaginations of the observers as the black diamond posted a 70 to 80 per cent hike in just six months. Thermal coal, which was trading at Rs 3,000 to Rs 3,500 per tonne at the beginning of the current year, has now miraculously jumped to a level of Rs 5,000 to Rs 5,500 per tonne because of which coal consumers are facing hardship. Power generating companies and steel manufacturers are among the worst affected. Coal from most of the mines in Vidarbha and Madhya Pradesh is being auctioned at the notified price after adding 20 to 30 per cent premium to it.
The basic price at which the coal is available to the bidder is called floor price. Interestingly, the bidders used to buy coal at the floor price till the recent past. But today, the bidders are lifting the commodity after paying 70 to 80 per cent extra in the auctions. General Secretary of the Central India Coal Dealers Association Rajendra Bansal said that various international parameters are driving the coal prices.
“The main reason is that the demand for coal has scaled new heights in the recent past, especially after the Governments started easing restrictions imposed on account of coronavirus. Today, there is increased demand for power which eventually triggered the demand for coal. But neither the domestic nor the international markets have proportionate availability of the commodity,” he explained. Indonesia is one of the major coal exporting countries where a large number of miners are private players. But due to the COVID-19, a significant number of mines in Indonesia are closed and thus coal arrival from the country has dropped. Apart from this, China is also buying a huge quantity of coal from international markets. Bansal said, these parameters have severely impacted the price of imported coal. “Similarly, India’s coal production is also not complementing the domestic demand. Many mines in the country are still operating below their capacity because of one of the other reasons which further create a gap in demand and supply,” he said, adding that the prices are likely to fly high for the next three to four months.