A steep fall in seaborne coal prices this year is threatening state miner Coal India Ltd.’s efforts to displace imports.

Asian benchmark Newcastle thermal coal prices have slid nearly 15% this year as demand slows down in top consumer China, creating oversupply.

Lower seaborne prices make imports more attractive, curbing appetite for the fuel sold in domestic auctions by the Kolkata-based miner. Although the company doesn’t disclose pricing data before quarterly results, auctions conducted by its peers show a price decline.

“Coal e-auction premiums in general have come under pressure due to a drop in international prices. That’s bound to impact Coal India’s earnings,” according to Rupesh Sankhe, vice president at brokerage Elara Capital India Pvt.

Coal India is battling rising competition from other local producers, whose combined output now makes up about a fifth of the country’s production. As a result, unsold inventory at its mines have grown to a record, exceeding the high levels seen during the pandemic. A rise in imports will make it harder for the company to reduce those reserves, potentially forcing it to curb production.

While large stockpiles may pose a challenge to the top miner, they are an advantage for the nation as it prepares to deal with a likely electricity demand surge this summer.

Coal India sells most of its fuel through long-term contracts, but the smaller volumes it auctions have a disproportionate impact on profits because of the premiums paid by customers.

NLC India Ltd., another state-run coal miner and power producer, said its average e-auction price for the quarter ended March dropped 14% from a year earlier. The trend will likely be similar for Coal India, Sankhe said.