Thermal coal prices at northern China's major transshipment ports have risen to fresh peaks in more than two years, propelled by persistent supply constraints and climbing costs, with many participants remaining confident on the near-term trajectory. 

On August 27, Sxcoal's CCI index for domestic 5,500 Kcal/kg NAR coal at Qinhuangdao port rose 5 yuan/t day on day to 874 yuan/t FOB with VAT, the highest since June 21, 2024. The index for 5,000 Kcal/kg NAR coal also increased by 5 yuan/t to 783 yuan/t, while the index for 4,500 Kcal/kg NAR coal climbed by the same amount to 700 yuan/t, all reaching their highest levels in more than two years.

The bullish sentiment at the Bohai Rim ports was reinforced by tightening supply from mining regions. Participants said supply at coal mines remained tight, with mine-mouth prices continuing to rise. This led to sustained losses of rail shipments to ports, discouraging some portside traders from making purchases.

Heavy rainfall in Inner Mongolia, one of the leading producing regions in China, has also disrupted logistics, restricting coal flows into ports.  

Sxcoal's data showed that the shipment on the Daqin railway, a major artery delivering coal from production areas to northern ports, stood at 879,500 tonnes, a relatively low level compared with full capacity of over 1.2 million tonnes.

Lower rail coal inflow kept accelerating the destocking at northern ports. The combined coal stocks at Qinhuangdao, Caofeidian, Jingtang and Huanghua ports fell to 25.59 million tonnes as of August 27, falling 4.82% week on week and 10.86% from the preceding month.

Shrinking cargo availability has prompted more sellers to raise prices or hold back cargoes in anticipation of further price gains.

Offer prices have moved up markedly across all major calorific values, with offers for 5,500 Kcal/kg NAR coal now hovering at 900-910 yuan/t, while a handful of deals were heard concluded at around 896 yuan/t for low-ash cargoes and one transaction for 5,500 Kcal/kg NAR material was sealed at 900 yuan/t for loading this week.

In the 5,000 Kcal/kg NAR segment, bid-offer spreads have widened considerably, with buying intentions heard at 800 yuan/t for 1.0% sulfur material proving unworkable as sell-side offers climbed to over 810 yuan/t. Certain sellers tested the 850 yuan/t level for lower-sulfur cargoes, while some even suspended sales altogether given the elevated replacement costs.

For 4,500 Kcal/kg NAR coal, tradable levels were indicated in a 700-710 yuan/t range, though sources admitted that cargoes at the higher end were not moving easily, underscoring a large gap between offer prices and actual buyer acceptance. A deal was heard done at index-plus 3 yuan/t for 0.6%-sulfur material.

The broader market mood remained divided, with a group of traders believing that the upward trajectory still has room to run given that mine-mouth supply is unlikely to ease quickly and significantly and that port inventory destocking is set to continue amid port-bound delivery constraints.

However, there were still a few traders and utilities that expressed caution over the sustainability of the rally, noting that the peak summer air-conditioning season was drawing to a close and that coastal coal consumption was already showing signs of a seasonal retreat.

Coastal demand outlook is increasingly clouded by weather factors, as Typhoon Saudel is forecast to bring heavy rains to southern and eastern provinces, which could curtail power plant coal burn and dampen any urgency for stockpiling. Utilities have prioritized long-term contract tonnage to bolster inventory buffers, turning to the costly spot market only for mandatory restocking.

Upbeat import market

Sentiment in the seaborne import thermal coal market remained buoyant, with prices experiencing leaps over the past few trading days, as tight availability from Indonesia coincided with rising Chinese domestic prices to spur a wave of speculative interest.

Panamax Indonesian 3,800 Kcal/kg NAR coal was heard concluded at $70-71/t FOB for October delivery, with some traders reportedly chasing October lots only to find sellers unwilling to commit at current levels.

A southeastern China-based trader source noted that the number of offers from Indonesian miners had shrunk considerably, partly due to dry-season river navigability issues and the limited volume under the RKAB work plan, leaving the market with a dearth of readily available cargoes.

For lower-CV Indonesian 3,400 Kcal/kg NAR material, FOB offers were heard at $60-61/t, while mid-CV 4,600 Kcal/kg NAR coal at index-plus $4.5/t premiums, sources said.

In the high-CV Australian segment, settlements climbed further, with a September-loading 5,500 Kcal/kg NAR cargo traded at $101/t FOB. Sources said October-loading cargoes are set to command even higher prices, although buyer acceptance remained lagging.

Despite robust prices, sources said end-user resistance has become increasingly evident, as most regional power generators are already well-stocked with inventories exceeding seasonal norms, while the approaching moderation in coastal consumption is likely to curtail aggressive tendering activity in the near future.

On August 27, the CCI index for Indonesian 3,800 Kcal/kg NAR coal stood at $70/t FOB and $81/t CFR South China port, rising by $1.2/t and $0.7/t respectively day on day. The index for Australian 5,500 Kcal/kg NAR coal gained $1/t to $121/t CFR.