Seaborne thermal coal offers in China crept up following weeks of decline, driven mainly by a sharp rebound in international freight rates and improved sentiment in the domestic market. Yet participants noted that any recovery would remain moderate, given high port stocks and power plant inventories.

Escalating geopolitical tensions in the Middle East, following a short-lived standstill, have pushed crude oil prices higher, driving international freight rates up by around $0.5-1/t in just a couple of days.

Sources said Panamax freight rates from South Kalimantan to South China have now climbed above $9/t, significantly increasing delivered costs for Indonesian cargoes.

As freight costs rose rapidly, prompt Indonesian 3,800 Kcal/kg NAR coal offers strengthened to around $64-65/t FOB, although several traders with prompt cargoes were willing to negotiate around $63.5/t FOB to reduce inventories.

Traders' bidding prices to utility tenders for this grade have largely increased to above 545 yuan/t, CFR South China with VAT, with some heard in a 550-570 yuan/t range, higher than the week-ago levels of about 540 yuan/t.

For the high-CV segment, Australian 5,500 Kcal/kg NAR coal was heard offered at $94-95/t FOB, with the Panamax freight rate to South China at $18-19/t. An offer for spot Australian 5,500 Kcal/kg NAR coal was slightly higher at 870 yuan/t, ex-stock Fujian port with VAT.

Rising power load and resulting higher coal burn at power plants also injected confidence into the market. According to the National Energy Administration, China's national power load refreshed the record on July 14, with the central China region and four provincial grids, southern Hebei, Sichuan, Hubei, and Hunan, also setting new records.

Data showed that coal consumption at some coastal power plants gained upward momentum this week, with daily burn rebounding by over 6% week on week and 7% from the preceding month. Inland power plants also showed higher consumption, albeit at a slower week-on-week growth rate.

While some sellers have begun testing higher offer levels in response to rising logistics costs and coal burn, most acknowledged that the underlying supply-demand fundamentals has changed little. Overall coal plant consumption hovered at a relatively low level for the same period in history, while their stock levels were comparatively healthier, indicating that further upward space may be limited without solid demand-side support.

High stocks at ports also rendered utilities in no hurry to restock and posed a sustained threat to the prompt cargo prices. Sxcoal's data showed that coal stocks at Guangzhou port reached 3.37 million tonnes as of July 14, rising 2.2% week on week and remaining over 11% higher than the year-ago level. Sources disclosed that vessel waiting times at the Xinsha terminal at the port even reached 15-20 days.

Additionally, utilities have largely completed procurement for August deliveries, with a few already beginning discussions for September cargoes, limiting any significant replenishment.

On July 15, the CCI index for Indonesian 3,800 Kcal/kg NAR coal stood at $62.5/t FOB and $73.5/t CFR south China port, up $0.5/t and $1/t day on day, respectively. The index for Australian 5,500 Kcal/kg NAR coal was also up $1/t to $111/t CFR.

Domestic market awaits demand confirmation

Traders at northern Chinese  ports became more reluctant to offer cargoes at discounted prices due to high costs, while buyers made more inquiries, supported by restocking for uncovered positions and limited non-power industrial demand. Actual transactions remained relatively scarce, and demand from power plants was measured.

Several traders cautioned that the current market optimism was driven more by improving expectations than by underlying demand. Participants widely cited restrained coal production due to mine safety inspections, declining northern port inventories, typhoon-driven logistics costs, and rising summer temperatures as supportive factors.

At northern ports, offers stayed relatively high. Cargoes of Shaanxi 5,500 Kcal/kg NAR coal were quoted at 840 yuan/t, FOB with VAT, while some Shanxi blended same-CV coal (S 1%) was heard offered even higher at 848 yuan/t. Sellers showed strong resistance to underselling.

Offers of Shanxi 5,000 Kcal/kg (S 0.8%) were at 750 yuan/t or so, yet transactions were heard to have fetched 746 yuan/t. One seller reportedly rejected a buying indication for 4,500 Kcal/kg NAR coal at 640 yuan/t, while trades were heard done for 1%-sulfur same-CV grade at a 645-660 yuan/t range.

One northern China-based trader source said most buyers continued seeking prices roughly 5 yuan/t below CCI index levels, a gap that sellers were generally unwilling to accept given elevated inventory replacement costs.

Another trader source estimated that prices could recover by 20 yuan/t or so if current sentiment persists, although stronger physical demand would still be required to sustain any meaningful rally.

Coastal shipping costs have also increased modestly due to recent typhoon disruptions, but several traders believe freight rates may struggle to extend gains unless cargo demand strengthens further, pointing to a fading support from the logistics front.

Combined coal stocks at Qinhuangdao, Caofeidian, Jingtang, and Huanghua ports remained at 28.35 million tonnes. Inventories, though slightly down from last week, rose for a second day due to weaker cargo outflows, keeping stock levels historically high for this time of year.

Participants expected domestic thermal coal prices to extend gains only gradually in the coming days, unless summer electricity demand accelerates enough to accelerate inventory drawdowns.

On July 15, the CCI Index for 5,500 Kcal/kg NAR coal stood at 810 yuan/t FOB with VAT, rising 5 yuan/t day on day; the index for 5,000 Kcal/kg NAR coal and 4,500 Kcal/kg NAR grade were 719 yuan/t and 629 yuan/t, up 5 yuan/t and 6 yuan/t respectively.