China's domestic thermal coal market exhibited cautious stabilization at the start of the week, with select traders attempting modest price hikes amid supportive short-covering and tightening pre-holiday supply.

Individual traders increased offer prices slightly on January 26. Offers of 5,000 Kcal/kg NAR coal were mostly hovering around 610 yuan/t FOB northern ports with VAT, with several quotations reportedly rebounding by 3-5 yuan/t from late last week.

However, downstream interest remained subdued, with counteroffers heard within 600 yuan/t for the same grade, resulting in thin liquidity, traders said.

Most sellers held selling prices firm, but buyers stuck to discounts, resulting in scarce high-price transactions in the sport market. Some offers of 5,500 Kcal/kg NAR grade were heard at 695-700 yuan/t, while bids were typically 10 yuan below asking levels.

Sources said that buying interests were primarily limited to cost-effective 4,500 Kcal/kg NAR coal, and its comparatively lower supply encouraged sellers to maintain offers at high levels. A cargo of 0.8%-sulfur 4,500 Kcal/kg NAR coal was heard offered at 523 yuan/t, while a 0.6%-sulfur same-CV Ordos cargo changed hands at 525 yuan/t.

Traders cited a combination of factors that have combined to lift sentiment: port inventory drawdowns, constrained shipments amid weak arbitrage, depleting stocks at some mines ahead of their early holiday, and a marginal demand uptick from cold-weather-driven power use.

Sxcoal's data showed that the combined coal stocks at Qinhuangdao, Caofeidian, Jingtang, and Huanghua ports in northern China stood at 25.83 million tonnes as of early January 26, falling 4.4% week on week and 13.5% on the month.

"Lingering uncovered short positions would increase the potential for a minor rebound before the Chinese New Year holiday," said a Zhejiang-based trader source. "It is highly likely to turn bearish again post-holiday as temperature is poised to rise fast."

Given its limited duration, the ongoing cold snap's price impact is expected to be modest and short-lived, insufficient to drive a substantial rebound ahead of the holiday.

According to the China Meteorological Administration, despite continued decline in temperatures and regional snowfall in northern China, most regions are still likely to experience temperatures exceeding seasonal norms by 1-3 degrees Celsius over January 26-February 4, with regional year-on-year increases of 4-5 degrees Celsius.

Supply constraints for imported low-CV coal from Indonesia is also likely to offer certain support to the domestic 4,500 Kcal/kg NAR coal prices and demand.

Pending RKAB mining quota approval, rainfall disruptions on mining and loading, and still constrained supply from South Sumatra due to coal transportation bans on public roads collectively capped the availability of low-CV coal cargoes in Indonesia, making low-priced cargoes even scarcer.

FOB offers for the most-popular 3,800 Kcal/kg NAR coal were about $3/t above indexes, while counteroffers for Panamax cargoes were heard at $50.5/t on January 26, trader sources said.

Some traders cautioned against aggressive short positions, citing high offers and limited spot availability. Some eyed a possible short-term rebound on the back of restocking ahead of the February holiday.