Coal India Output Seen Subdued to Clear Mounting Stockpiles

  • Output in May to be capped by inventories: Reliance Securities
  • April production declines 4.1% y/y, shipments increase 6.7%

Coal India Ltd. may keep production subdued after it fell to the lowest seasonal level in three years as the world’s biggest miner of the fuel seeks to cut inventories.

Output in April dropped to the least for the month since 2014, and shipments surpassed production by the biggest volume in records going back almost four years. The company may continue to clear stockpiles at least for another month, according to Rupesh D. Sankhe, an analyst at Reliance Securities Ltd.

“There is no point producing and not being able to sell it, so the company will keep regulating production according to demand,” Sankhe said by phone. “Power plant coal stocks are coming down. Demand may improve and production may start picking up again when plants begin rebuilding their inventory.”

Stockpiles held by Kolkata-based Coal India rose 19 percent during the year ended March 31 to 68.6 million metric tons, Coal Minister Piyush Goyal told lawmakers last month. The company’s production in April declined 4.1 percent year-on-year to 38.44 million tons, while shipments rose 6.7 percent to 45.3 million, according to a stock exchange filing Tuesday.

The company’s output, which typically plummets after the end of the fiscal year, has missed annual targets for at least the past five years. Coal India, which reported record monthly production in March, cut its output and shipment goal for the current fiscal year to 600 million tons from 660 million due to a lower demand forecast.

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