Thermal coal prices at China's northern ports climbed to roughly three-year highs. Slow production recovery, reduced rail deliveries during Daqin maintenance, and import constraints have limited supply, leaving the market prone to further short-term gains, albeit at a slower pace.

On October 15, Sxcoal's CCI index for domestic 5,500 Kcal/kg NAR coal at Qinhuangdao port gained 5 yuan/t day on day to 1,023 yuan/t, the highest since October 13, 2023. The index for 5,000 Kcal/kg NAR coal climbed 5 yuan/t to 925 yuan/t and 4,500 Kcal/kg NAR coal increased 4 yuan/t to 828 yuan/t, both hitting nearly three-year highs.

Supply-side constraints from major production hubs remained the primary driver. China's raw coal output from producers above designated size fell by 7.7% to 361.8 million tonnes in August, according to data from the National Bureau of Statistics, marking the third consecutive month at the lowest level for the same month in five years,

Capacity utilization at Sxcoal-surveyed thermal coal mines in Shanxi, Shaanxi and Inner Mongolia increased to 88.97% during the week ended October 14, up 1.1 percentage points from late September but still below the more typical level of above 90%. Meanwhile, market participants said some mines had resumed operations but were cautious about ramping up production amid strict safety oversight and concerns over accountability, limiting the speed of the recovery.

The 20-day autumn maintenance of the Daqin railway, which began on October 7, has also reduced coal arrivals at northern ports and contributed to inventory drawdowns. Sxcoal's data showed that the total stocks at Qinhuangdao, Caofeidian, Jingtang, and Huanghua ports fell to 23.45 million tonnes as of October 15, down nearly 3% week on week and marking the fifth consecutive day of drawdown.

Meanwhile, tight supply from overseas mines, especially in Indonesia, and stronger import coal prices have limited the scope for additional imports to ease domestic tightness. These factors are likely to keep prices supported.

However, the overall upward pace is highly likely to retreat, given growing selling pressure at high levels and expectations of more available supply going forward as authorities are pushing for production resumption to secure energy supply during this winter heating season.

A northern China trader pegged 5,500 Kcal/kg NAR coal at around 1,040–1,050 yuan/t FOB northern ports, VAT included, while noting offers near 1,060 yuan/t struggled to find buyers amid cautious demand. A separate source said 5,000 Kcal/kg NAR coal with 0.6% sulfur was traded a day earlier at 945 yuan/t, but a lower offer at 940 yuan/t has started to meet resistance, reflecting a more hesitant market.

As buyers shunned purchases at elevated price levels before the pace of mine restarts becomes clearer, some traders began taking profits, adding to near-term uncertainty. Market participants said the cost of replenishing port stocks remained high and cheaper cargoes were increasingly scarce, making a near-term market decline unlikely.

Sxcoal's real-time thermal coal market sentiment index, primarily used to monitor the short-term outlook of market participants, strengthened further day on day to 0.88 as of 15:30 on October 15, suggesting that participants remain optimistic about the short-term price outlook. The index ranges from 0 to 1, with a reading closer to 1 indicating stronger bullish sentiment.

Winter stockpiling ahead of the heating season remains a key source of potential demand, but power plants have been unwilling to build inventories aggressively at current prices.

Coal consumption at power plants run by six major coastal power groups was broadly in line with the year-earlier trend, while their inventories remained above year-ago levels, suggesting that utilities still had some buffer and were under no immediate pressure to secure cargoes at high prices.

The market will likely remain cautiously balanced due to constrained supply and hesitant spot demand.

Seaborne imports stay firm as costs rise

Seaborne imported thermal coal prices remained firm, with strong overseas offers and elevated freight rates pushing up landed costs and bidding prices to utility tenders.

Bids to southern utilities in China were heard exceeding 1,060 yuan/t for Australian 5,500 Kcal/kg NAR coal and above 700 yuan/t for 3,800 Kcal/kg NAR Indonesian coal on a CFR basis with VAT, Sxcoal's tracking data showed. Major utilities continued to actively release tenders, yet they remained largely cautious about locking in cargoes at current levels.

Offers for Panamax Indonesian 3,800 Kcal/kg NAR coal were heard at $81-82/t FOB, while Australian 5,500 Kcal/kg NAR coal was at about $115.5/t FOB, broadly flat from a day earlier. The Capesize freight rate from Newcastle to South China rose by $0.5/t or so week on week, while the Panamax rate from South Kalimantan to South China climbed by some $0.3/t.

Indonesian 3,800 Kcal/kg NAR coal was difficult to buy at $81/t FOB, and offers above $81.5/t also struggled to attract buyers, according to one importer.

Still, the market remained underpinned by supply concerns. Traders said an Indonesian producer had been unable to secure approval for its November production plan, forcing a shipment delay. The outlook on the overall addition of Indonesian supply in the fourth quarter is uncertain, influenced by strict RKAB quota restrictions and the potential for drought relief to ease river barging issues as the wet season begins.

Besides, winter freeze conditions could complicate loading and shipping from Russian ports.

Import market participants remained cautiously optimistic, expecting domestic winter restocking and resilient power demand to provide support later in the season amid supply uncertainties.

On October 15, the CCI index for Indonesian 3,800 Kcal/kg NAR coal stayed unchanged day on day at $80/t FOB and $93/t CFR South China port. The index for Australian 5,500 Kcal/kg NAR coal was also flat at $138/t CFR.