Backed by robust demand from this sector, special forward e-auction prices rose by 35 per cent over the notified prices of the coal grades in November while for the Q1-3 period, the increase over notified price stood at 25 per cent.
According to sector analysts, while the average e-auction prices during the Q3 period would have hovered around more than Rs 2,100 a tonne, it is likely to fall to Rs 1,800 a tonne in the fourth quarter.
"Trend in Q4 would depend upon the trend in the core sector and Index of Industrial Productivity growth numbers. However, allocation of fuel supply agreements to independent power producers holding power purchase agreements and further action on linkage auction would dampen the spot trade volumes," said Debasish Mishra, partner at Deloitte Touche Tohmatsu India LLP.
Last December, ten private power producers obtained a 27.18 mt annual linkage from the Maharatna company.
Earlier, Coal India officials had also conceded to the fact that e-auction sales volume, as well as prices, may get hit if linkage agreements are prioritised as the demand for coal in the auctions would fall.
E-auctions directly add up to Coal India's bottomline as the prices are often higher by at least 20 per cent over the notified price. Thus, effectively, while the miner spends the same amount of money to mine the coal, which is either sold as linkage or put under the hammer, it earns 20 per cent higher in the auctions.
"Till now, around 80 mt of coal has been put up in the auctions and, in Q4, it is expected that another 20-30 mt will be routed through this route," a Coal India official said.
However, amid the projection of tepid demand from the power industry, the cement and steel sectors might come to the miner's rescue.
During November, auction prices for the non-power segment rose by 52 per cent over the notified price, which was the highest in any given category of coal auctions. The demand was primarily led by cement manufacturers on account of the uncertainty around petcoke.
Mishra is of the view that the steel and cement sectors may drive demand in the forthcoming coal auctions in the non-power category if prices are more economical than global coal and petcoke prices.
"Also, there are signs of improving industrial activity, which would lead to increased electricity demand and, hence, demand for thermal coal," he said.
Edwin Yeo, managing editor-coking coal and metallurgical coke at S&P Global Platts, however, believes that India's dependence on imported coking coal, which is primarily used by the steel industry, will continue despite Coal India allocating the requisite black diamond in the auctions.