Sentiment in China's domestic thermal coal market at northern transfer ports deteriorated further at the start of July, with trading activity grinding to a near halt as persistently cool, rainy weather across eastern and southern China caps power demand and forces sellers to slash offer prices in a bid to attract elusive buyers.

Tepid offtake by downstream users and record-high port inventories for this time of year have continuously fueled expectations that any seasonal price recovery will be slower than seasonal norms, leaving the market still searching for a floor.

Sxcoal's data showed that the combined stocks at Qinhuangdao, Caofeidian, Jingtang, and Huanghua ports climbed further by 2.75% week on week to 29.03 million tonnes on July 1, marking a multi-year high for this date.

The relentless build-up was occurring despite a pullback in coal railings into these ports, as some miners and traders scaled back spot dispatches to avoid widening losses. Some port sellers, particularly those with Shanxi cargoes, have temporarily withdrawn from spot sales, holding onto stocks amid a lack of profit and pinning hopes on a future demand surge.

Bearish sentiment still prevailed in the market, forcing continued underselling attempts among a few traders. They viewed that inventory destocking has been proceeding far too slowly and that without a prolonged and intense heatwave, prices will grind further lower.

Offers for 5,000 Kcal/kg NAR coal were heard around 735-745 yuan/t, FOB northern ports with VAT, with deals for 1%-sulfur same-CV coal concluded at a discount of 8 yuan/t to the CCI 5000 Index. Some sources expected prices to test the 720-730 yuan/t range before finding genuine support.

Some offers for 4,500 Kcal/kg NAR coal slid to around 645 yuan/t, after initial quotes of 650 yuan/t met with muted inquiries earlier this week. The 5,500 Kcal/kg NAR segment saw some lower offers nearing 830 yuan/t, with some sellers eyeing a support level of around 820 yuan/t.

On July 1, the CCI Index for 5,500 Kcal/kg NAR coal stood at 835 yuan/t FOB with VAT, down 6 yuan/t day on day; the index for 5,000 Kcal/kg NAR and 4,500 Kcal/kg NAR coal also dropped 6 yuan/t to 743 yuan/t and 643 yuan/t, respectively.

Import market stalls

The seaborne import market, though sentiment remained subdued, is showing early signs of stabilization after a prolonged and aggressive sell-off. Recent weeks saw Indonesian 3,800 Kcal/kg NAR coal drop by roughly 50–60 yuan/t and Australian 5,500 Kcal/kg NAR product fall by as much as 100 yuan/t.

The pressure from congested discharge at southern China ports has eased but only marginally, given still high absolute stocks and modest end-user restocking appetite.

Traders reported a growing reluctance to dump cargoes at deepening discounts, partly because low-priced prompt cargoes have been largely cleared and partly due to the ongoing cost assessment for fresh index-linked cargoes, leaving little incentive to offer rather low prices.

Bids to power utility tenders for late July to August delivery of Indonesian 3,800 Kcal/kg NAR coal were around 570 yuan/t CFR South China with VAT, netting back to $64.6/t or so FOB on a Panamax basis.

The outlook for Australian high-CV coal was comparatively weaker, clouded by anticipated additional spot cargoes returning to the Asian market, with traders predicting that a further leg down to 840-850 yuan/t (incl. VAT) on a delivered basis was probable if the domestic downturn persists.

An offer for Australian 5,500 Kcal/kg NAR coal was heard at around $113/t CFR South China, with the seller reporting no buying interest.

On the demand side, power plants under six major Chinese coastal power groups were sitting on growing coal stockpiles, with inventory days-of-use extending to the highest level for this time of year in recent history, partly owing to lackluster burn.

Meteorological forecasts point to another 10 days of abundant rainfall across the middle and lower Yangtze, southern China, and the southwest, with accumulated precipitation in some pockets of the regions well above seasonal norms, ruling out any meaningful near-term uplift in air-conditioning demand.

Utilities thus lack any operational urgency to procure spot cargoes beyond the occasional low-ball tender, reinforcing the prevailing narrative that unless an extended, extreme heat event takes hold after mid-July, current price levels may stay rangebound.

On July 1, the CCI index for Indonesian 3,800 Kcal/kg NAR coal was at $64.5/t FOB and $74.5/t CFR, unchanged day on day. The index for Australian 5,500 Kcal/kg NAR coal was also unchanged at $112.5/t CFR.