Premiums at India's domestic coal auctions rose sharply in March with industrial buyers moving to secure supply following a surge in seaborne coal prices and freight rates, led by the US–Iran conflict and pre-summer restocking by power utilities.
State controlled Coal India (CIL) — which meets about three-quarters of India's coal needs — recorded an average premium of 45pc in its March electronic auctions over the notified prices applied to long-term contracted sales, it said last week. This compares with an average premium of 35pc in February. Meanwhile, the overall average premium stood at 38pc for the April 2025-March 2026 financial year.
The rise in premiums reflects the rising cost of imports, prompting buyers to actively seek domestic coal sold through spot electronic auctions, also known as single window mode agnostic e-auctions. These auctions accounted for 14pc of CIL's sales in the previous financial year.
Coal and petroleum coke prices, along with freight rates, have risen sharply following supply-demand imbalances, amplified by geopolitical tensions in the Middle East.
Argus assessed Indonesian GAR 4,200 kcal/kg coal at $59.51/t fob Kalimantan on 2 April for Supramaxes, up by about 10pc from $54.31/t on 27 February, just before the tensions escalated. Prices have also risen by 33pc from $44.91/t at the start of the year.
Newcastle NAR 5,500 kcal/kg coal rose by 1.9pc to $87.59/t fob on 2 April, compared with late February and is up by 24pc since the beginning of the year.
South African NAR 5,500 kcal/kg coal was assessed 7.4pc higher at $96.11/t fob Richards Bay on 2 April compared with that of 27 February, with prices 31pc higher on a year-to-date basis.
Indian utilities typically import Indonesian coal that meets technical parameters of most coastal power plants. Delhi has already asked all thermal power utilities to prepare for a harsher summer. Meanwhile, India has directed private-sector utility Tata Power to restart its 4GW imported coal-fired utility in western Gujarat state.
Sponge iron producers prefer coal from South Africa with a high fixed carbon content, while cement makers prefer petroleum coke, and switch to coal during price surges. Cfr India 6.5pc coke was assessed 24pc higher since the start of the war at $160/t on 1 April. The prices are also up by 36pc on a year-to-date basis.
Currency volatility has added to landed costs. The Indian rupee averaged at 92.90 rupee to a dollar in March, compared with Rs90.76 in February. It has slipped further to Rs93.46 so far in April, implying additional cost in rupee terms. But coal auctions are priced in rupees, shielding buyers from foreign exchange swings.
Auctions
Among CIL's subsidiaries, Northern Coalfields recorded the highest March auction premium at 80pc, followed by South Eastern Coalfields (SECL) at 70pc and Eastern Coalfields at 48pc.
Individual auction results show a 25-171pc premium growth over the notified price. The highest growth in premium was for a G10 or GAR 3,100-3,400 kcal/kg domestic coal from SECL's Amadand mine, with a deal closing at Rs3,682/t free on rail/road (for) basis, up by 171pc above its notified price. The coalfield also achieved a 45pc premium over the notified price, selling a G6 or GAR 4,200-GAR 4,400 kcal/kg coal at Rs4,014/t on for basis — the domestic market equivalent of fob prices. The prices are still sharply lower than international fob and delivered coal prices.
Single window auctions are dominated by industrial buyers, but some independent power producers also participate for small spot volumes. Utilities rely primarily on long term CIL contracts or linkage auctions.
Sponge iron, cement costs rise
The domestic coal blend in sponge iron production has risen to about 80pc from 30-40pc earlier in key industrial hubs, with some non-integrated units switching entirely to domestic coal to protect margins.
Rising auction premiums have pushed up production costs, raising sponge iron prices in key centres like Raipur by 5-7pc, according to Anil Nachrani, president of the Chhattisgarh Sponge Iron Manufacturers' Association.
Cement producers are also feeling the impact. The cost of NAR 4,000 kcal/kg coal parcel bought in the auction has risen by 11pc to about Rs8,000/t for delivering the cargo to the plant, increasing per unit energy costs from Rs1.60/unit to Rs1.85/unit, a cement company official said. But the prices are still cheaper compared with Rs2.40/unit on the basis of $150/t cfr price of buying NAR 6,900 kcal/kg Northern Appalachian or NAPP coal.
If this uncertainty in the seaborne market prolongs, the premium will increase further, raising the cost of production and potentially cement prices, another cement company official said.
