India’s FY22 Coal output to grow by 2-3% : Care Ratings

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Biznextindia : With recovery in economic activities, India’s Coal production is likely to grow by 2-3 per cent to 730-745 million tonnes (MT) in 2021-22 as against 716 MT in the 2020-21 financial year, Care Ratings has estimated.

“India’s coal production is expected to grow by 2-3% at 730-745 mt in FY22 compared with 716 mt in FY21. Demand for both thermal and coking coal is expected to remain strong as global economic activities improve after the covid-19 downturn in the second half of CY2021. The sharp uptrend in seaborne coking coal prices during the June quarter is likely to continue and we expect stronger prices in the second half of CY2021 as the global supply-demand balance continues to remain tight. Ex-China demand particularly from India is expected to improve with the second wave of Covid-19 pandemic getting largely under control and acceleration in vaccination drive. Demand from Japan, Europe are also  expected to remain strong” said Care Ratings.

India’s coal production continued to increase y-o-y in July 2021 by 19.3% to 54.4 million tonnes (mt) over a low base, limited Covid-19 pandemic-led disruptions and pick-up in demand from the power sector. Coal production was also higher sequentially by 7% in July 2021.

Meanwhile, International coal prices have soared to their highest level since 2008. The price of Australian coal, averaged $152 per tonne in July 2021, up almost 195% from a year ago. This is mainly driven by robust demand from China as drought in its southern region hit hydropower generation and boosted demand for coal.

However, the Chinese government has announced releasing 10 million tonnes of coal stocks from its strategic coal reserves. This measure is expected to help cool the prices for coal internationally.

In the domestic market, Coal India Ltd (CIL) is expecting to increase its average price realisation by around 10-15% on a sequential basis through the e-auction route in Q3FY22 due to increase in input cost. The average price realisation is expected to be close to Rs 1,700-1,800 a tonne in Q3FY22 as compared with Rs 1,569 a tonne in Q2FY22.

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