Coal off-take to face temporary headwinds due to Covid resurgence: Ind-Ra

Domestic coal production as well as off-take could face temporary headwinds due to the second Covid wave-led restrictions along with localised lockdowns, said India Ratings and Research (Ind-Ra).

Accordingly, the ratings agency report cited factors like lower month on month (MoM) power demand on curtailed industrial activities supporting the trend.

"Nevertheless, normalised inventory levels at power stations shall support coal offtake and thus production, on the previous year's low base," the report said.

India's coal offtake spurred up 16.3 per cent MoM and 12.4 per cent YoY in March 2021 to 65.7MT, driven by a 16.7 per cent MoM higher domestic power demand.


"Accordingly, while domestic coal production improved 28.9 per cent mom in March 2021 to 87.5MT, it was lower 3.1 per cent yoy due to the above-average inventory levels at end-February 2021."

"Overall, coal production and offtake were only 2.9 per cent and 3.5 per cent lower YoY, respectively, in FY21 despite Covid-19 outbreak, supported by a steady recovery in economic activities over 2HFY21."

According to the report, import prices for Indonesian-origin thermal coal, primarily consumed in the power sector, shot up 36 per cent MoM up to end-April 2021 on a strong Chinese demand and stocking requirements ahead of the high-demand summer season.


"On the other hand, South Africa-origin thermal coal prices, primarily used in sponge iron manufacturing in the steel sector, dipped by 10-16 per cent MoM at end-April 2021 on the back of reduced demand as increased lockdown restrictions have been imposed, especially in India, which accounts for over 50 per cent of its exports."

"As oxygen is a key input in steel making, its shortage due to the diversion of industrial oxygen for medical uses has reduced demand for sponge iron largely from secondary steel producers while the primary producers continue to operate normally."

In addition, it said that while Indonesian coal cost could witness some correction as the demand normalises, prices for South Africa coal might remain subdued amid uncertainties in the sponge iron sector in India. - IANS