The rapid price increases in China's thermal coal market at northern transfer ports have left many participants increasingly wary, with a few describing the surge as overly aggressive and potentially unsustainable as the May Day holiday approaches.

Although offers continued to climb, with low-sulfur 5,500 Kcal/kg NAR Shanxi coal quoted up to 830-845 yuan/t FOB with VAT northern ports, actual concluded business remained selective. Some offers of 5,000 Kcal/kg NAR cargoes rose to around 750 yuan/t, yet deals were mostly concluded at 735 yuan/t or so, as end users hesitated to make purchases at elevated levels.

Cargoes of some low-sulfur 4,500 Kcal/kg NAR Shanxi coal were traded around 640 yuan/t, but traders reported increasing reluctance among sellers to sell at these prices.

While this rally has been largely driven by pre-holiday restocking, higher logistics costs, particularly for shipments from some northern mining areas, have also played a role. This is especially true as the Hohhot railway bureau adopted a system in which higher-paying shipments take priority.

Multiple sources noted that sellers have grown reluctant to offer low prices, instead adding an implicit post-holiday premium to their quotes. However, downstream acceptance has not kept pace. "The prices have risen a bit too fast," said a Tianjin-based trader source, expressing plans to sell some volume after the break.

Despite fresh inquiries from end users, there is still uncertainty over whether the demand momentum will carry through the holiday period. Some traders have even raised concerns that the market may have already drawn too heavily on future upside potential.

In fact, the overall market activity has already slightly slowed on the last trading day before the holiday, with more participants shifting to a wait-and-see stance.

Daily coal shipments on the Daqin line rebounded quickly to full levels of around 1.3 million tonnes post maintenance. While this has been somewhat offset by high vessels anchoring at ports, it still raises concerns of gradual inventory buildup over a slightly longer time. This could add uncertainties and possibly lead to profit-taking in the short term.

High import costs test end-user appetite

The seaborne import market somewhat mirrored the emerging domestic caution, following a further increase in offer prices.

Aggressive buying by some major trading houses in recent weeks had lifted the overall import market by several dollars, but end users are showing clear limits to their tolerance.

Offers of Panamax Indonesian 3,800 Kcal/kg NAR coal were largely offered in the $66-67/t range, resulting in landed prices around 600 yuan/t into South China with VAT. That was significantly higher utility buying levels through the very recent tenders at around 567-576 yuan/t.

Sources noted that while South China utilities have remained active due to weather-driven thermal power demand, high prices are resulting in more tender failures and measured procurement.

Australian 5,500 Kcal/kg NAR coal was quoted as high as $97-104 /t FOB, pushing landed costs toward or above 900 yuan/t. One state-run power utility, with comparatively higher restocking needs, reportedly bought some Australian supplies at 910-915 yuan/t, CFR China with VAT, roughly $98/t FOB.

Some trader sources also disclosed that Australian miners were increasingly reluctant to offer, expecting further price hikes in early May.