Coal India Expected To Report First-Ever Drop In Offtake In Over 13 Years
Coal India’s offtake for the ongoing fiscal is expected to drop for the first time in more than 13 years.
Coal India Ltd.’s offtake for the ongoing fiscal is expected to drop for the first time in more than 13 years even as its offtake volumes rose in January on the back of restocking by power plants.
Offtake, or despatches, are expected to fall 3-6 percent year-on-year to 592 million tonnes, according to brokerage estimates compiled by BloombergQuint.
That comes as production at the world’s largest coal miner was impacted by the shortage in rake availability, a delay in finalising subcontracts and mining fatalities at Mahanadi Coalfields Ltd. and South Eastern Coalfields Ltd, according to the fossil fuel miner’s exchange filing. A prolonged monsoon and flooding at the Dipka mine added to its woes.
This will also be the twelfth consecutive year that the company will miss its offtake target, according to BloombergQuint data. In January, the state-run miner had lowered its FY20 production guidance to 640 million tonnes from 660 million tonnes. The miner contributes over 80 percent of coal required by the country’s thermal power plants.
How Coal India Fared
The miner, on a year-to-date basis, sold 473.3 million tonnes of coal—down 4.8 percent year-on-year.
However, higher production and offtake growth at Mahanadi Coalfields and South Eastern Coalfields in January is expected to continue in the remaining two months, aiding the miner’s recovery, Edelweiss Securities said in a note.
Green Shoots In January
Coal India’s offtake volumes rose 7 percent year-on-year and 5 percent sequentially in January to 56 million tonnes, according to the state-owned miner’s exchange filing. The sharp recovery in offtake volumes of Mahanadi Coalfields and South Eastern Coalfields, which are up 16 percent and 9 percent year-on-year, respectively, is a major positive, brokerages said.
The recovery, according to Citi, was driven by continued restocking at power plants and relatively better power generation. Coal stocks at power plants improved to 19 days by the end of last month compared 18 days at the end of December 2019, the brokerage said in a note.
Road Ahead
According to Edelweiss Securities, Coal India’s FY21 sales volumes is expected to grow 6 percent year-on-year due to a pick-up in its larger subsidiaries—Mahanadi Coalfields and South Eastern Coalfields.
The company is well placed to achieve the offtake target of 750 million tonnes for financial year 2020-21 on the back of expected demand growth.
(Brokerage estimates were compiled from research reports of Edelweiss Securities, Citi and Emkay Global.)