More bad news for Adani: Coal India slashes coal prices as stockpile soars

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The world’s largest coal miner Coal India has opted to cut prices rather than its ballooning domestic mine production. That’s more bad news for Australian coal projects hoping to export to India.

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The world’s largest coal miner Coal India has opted to cut prices rather than its ballooning domestic mine production.

Coal India and its customers now have a massive stockpile of 97 million tonnes.

Just over a month ago I and Ashish Fernandes  from Greenpeace noted that Coal India’s stockpiles had grown to 84 million tonnes, with the mostly publicly-owned company grudgingly informing the Bombay Stock Exchange (BSE) that this would “create stock management problems, deterioration in quality of coal and coal may catch fire.”

The stockpiles have now grown to 97 million tonnes comprising 58 million tonnes at Coal India’s mines and a further 39 million tonnes at its customers power plants, not that the company has informed the BSE of this. The company’s latest announcement to the BSE cryptically stated only that they have “given up performance incentive” for “supplying higher grades of coal” in order to “improve lifting of coal.”

This decision, Coal India lamented in its announcement to the BSE, “was taken due to fall in international coal prices, improved supply of coal by CIL and there is a sluggishness in coal demand in general and higher grades of coal in particular.”

Back in late January when the massive stockpiles was becoming an issue in the Indian media, the Minister for Power and Coal, Piyush Goyal, insisted that – while he couldn’t direct the government-owned enterprise on pricing –  “all I asked them is to get out the stock.”

Despite its best efforts, Coal India couldn’t.

Since January Indian power generators have also been in the ever-tightening grip of drought which has seen a number of water-cooled coal plants shut down.

Early in March the Economic Times cited an anonymous senior official of Coal India who said:

“The power companies are not in a position to take any additional coal and we are being requested, both officially and unofficially, to cut supplies, which has prompted us to scale down production at several other mines apart from the ones where we have stopped production temporarily.”

However, while scaling down production would have been a logical response, Indian Government ministers were transfixed with the idea that the bigger the production number for the March 31 end of financial year, the better everything would be.

Ultimately Coal India reported they produced 536 million tonnes, but now they face a stockpile equivalent to just under a fifth of their annual production.

Faced with a choice of cutting production or prices they have opted for the latter.

In early March an anonymous Coal India executive was quoted in the Indian financial news outlet Livemint stating that cutting the price of coal to boost sales would have “far-reaching unfavourable implications” for the company’s profitability.

Now Coal India has embraced price cuts of between 10-40 per cent until the end of March 2017 in a desperate bid to liquidate combustion-prone stockpiles.

Coal India’s decision to slash prices on its upper grades of coal – which it has also signalled could be extended to lower quality coal – is targeted at further undermining coal imports.

Coal India’s decision is a death knell for Adani’s proposed Carmichael coal mine, which is predicated on the increasingly fanciful notion that the company can profitably export 60 million tonnes of low-grade thermal coal a year into an oversupplied global market dominated by loss-making coal companies.

Coal India’s domestic coal production boom though has come at a terrible cost imposed on farmland, scarce water, forests and innumerable communities.

Coal India is betting that, in taking a financial hit over the next year, domestic coal consumption will inevitably climb ever more upwards as the financial problems of the state-based distribution utilities ease.

Perhaps.

When the boom-time prices prevailed in the global coal market a raft of Indian companies – including Adani, Jindal, Reliance and the ICVL consortium of NTPC, Coal India and others – had grand dreams of buying or building mines from Australia to Indonesia to South Africa and Mozambique.

While the projects – once touted as the next big thing in coal industry circles – have now largely withered on the vine, Coal India has now embraced a business strategy aimed at undermining the very imports major Indian companies once extolled as essential and inevitable.

Bob Burton is the Hobart-based Editor of CoalWire, a weekly bulletin on global coal industry developments. (You can sign up for it here.) His Twitter feed is here.

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6 Comments
  1. suthnsun 3 years ago

    Incredible that they elected to cut price instead of production..hopefully they are concerned once production stops it will be difficult to re-start?

    • Jens Stubbe 3 years ago

      The cost of solar and wind are on a steady trajectory and now biomass based upon more efficient and cheap technology is poised for huge growth as well. All fossil generation is relying heavily upon direct and indirect subsidies. Trusty governments has up until this moment in time convinced themselves that coal was the fast and cheap route to sufficient energy supply. Now the government can see that no new coal capacity can be built cost effectively and everybody knows that if you build a coal power plant or a coal mine where the economy can barely scrape away then a few years from now it will be loss making because there is no stopping to lower cost from solar, wind and biomass.

      The probable development in India will be that new coal mine projects stops and that new coal capacity stops being added.

      Here is a recent survey of the status on proposed coal power in India http://www.sourcewatch.org/index.php/Proposed_coal_plants_in_India

      The coal industry has gone from frantically building to a much slowed pace.

  2. JeffJL 3 years ago

    “…and we are being requested, both officially and unofficially, to cut
    supplies, which has prompted us to scale down production at several
    other mines apart from the ones where we have stopped production
    temporarily.”

    Perhaps they could have negative storage in the mines where the production had been stopped?

  3. david_fta 3 years ago

    “bad news for Adani” ?

    Might be bad for Adani, but it’s great for Queensland – whether our government believes it or not.

  4. daaus 3 years ago

    Important. Is anyone realising the real unobvious longer term disaster here for humanity?
    It’s a long way away but all energy stores should be saved for when the sun dies or if we need to move planet in case of a planet disaster. There’s no excuse these days with the great tech we have, to harness the suns solar energy. Wind and water energy tooo.
    Once all oil coal and gas are gone and wasted then our future had NO backup.

    • Jordan Moulds 3 years ago

      “…when the sun dies” …I thought you were joking at first. We have at least 1 billion years before we have to worry about that. At any rate, we won’t be relying on burning coal or oil to get us off this rock. I highly doubt that the earth will be able to sustain even 1000 more years of forever-expanding human life on this planet, before it is beyond saving. 🙁

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