Coal India Mulls Output Cuts as Inventories Mount on Virus Fight
Coal India is considering an output cut at some mines, as demand from power generators amid a countrywide lockdown declined.
(Bloomberg) -- State-run Coal India Ltd. is considering cutting output at some mines, aligning it with a steep drop in demand from power generators amid a countrywide lockdown, according to people with knowledge of the development.
The Kolkata-based miner will focus on clearing inventories and reducing production at thermal coal mines that have high stockpiles, said the people, who asked not to be identified as the information isn’t public. The scale of any cutback hasn’t been finalized as the company is still trying to estimate demand for the fiscal year, the said. A spokesman didn’t respond to requests for comment.
A three-week lockdown starting March 25 to stop the spread of the coronavirus has brought several industries to a halt, slashing electricity demand by a quarter and forcing generators, including NTPC Ltd., the nation’s largest, to shut capacity. That’s had a knock-on effect on coal, which helps generate nearly 70% of India’s electricity.
The move comes just as the miner reported record output for last month -- 84.4 million tons, up 6.5% from the year earlier -- even though shipments dropped 10%. The company typically reports its highest figures in March, the final month of the fiscal year, as it accelerates work to meet annual targets.
“Coal India is likely to catch a breath for a couple of months and bring its production in tune with demand,” said Rupesh Sankhe, an analyst at Elara Capital India Pvt. in Mumbai. “The company and its customers are keeping a large inventory and it doesn’t make sense to continue with the same rate of output.”
The company had stocked up a record 74 million metric tons at its mines as of Tuesday, 36% more than a year ago, the people said, while power station inventories have surged to 44.7 million tons, the highest in data going back to 2008, according to the country’s Central Electricity Authority. Those inventories combined are more than a two-month average of production at Coal India last fiscal year.
©2020 Bloomberg L.P.