China's portside thermal coal market showed some signs of cooling on May 7, with buying interest easing slightly after recent rallies. However, offer prices continued to increase, supported by tight supply for certain grades and expectations of summer restocking.

Some low-sulfur 5,000 Kcal/kg NAR cargoes were heard offered around 750 yuan/t, FOB northern ports with VAT, compared to a pre-holiday transaction of 740 yuan/t or so. Trades for 0.6%-sulfur 5,500 Kcal/kg NAR coal were heard at 835 yuan/t ahead of the holiday, yet buying indications for similar cargoes were reportedly slightly lower at a 3 yuan/t premium to the weekly average of CCI 5500 index.

Actual transactions remained thin, with high-priced cargoes untraded as buyers stepped back to assess the market, aside from a few profit-taking activities. "Prices have risen too fast. Downstream buyers are not recognizing these levels, and cargoes are getting difficult to move," said a trader source based at one northern port.

However, spot supply remained tight for some premium grades due to railway congestion. Wagon plans have been prioritized for long-term contract coal, leaving limited capacity for spot participants.

"It's difficult to secure rail wagons for spot cargoes. Station inventories are high, and the transport bottleneck is actually limiting supply to ports, which has slightly weighed on mine-mouth prices," said a Fujian-based trader source.

Additionally, certain Inner Mongolian miners were heard to have started blending lower-CV 4,500 Kcal/kg NAR material with higher-CV grade into 5,000 Kcal/kg NAR specifications for sale.

Some participants expected a period of price consolidation after the rapid run-up, while others see further upside once summer restocking kicks in. "The market needs time to digest the recent gains. Offers are firm but buying interest is subdued," commented an Inner Mongolia-based trader source.

Data showed that coal consumption at power plants under six major Chinese coastal power groups on May 6 eased 3.06% week-on-week and fell 3.71% from the year-ago level. This was partly owing to increased rainy days in some southern provinces that eased demand for cooling.

However, relatively low stockpiles at these power plants compared to historical levels for the same period make any significant downward correction unlikely. "No one dares to go short given the overall trend. The probability of further price increases remains high," said a Singapore-based trader.

Hydropower generation has been recovering strongly this year. Data showed that the Three Gorges outflow was up 38.9% month-on-month and 49.4% year-on-year on May 6, indicating hydropower generation remained buoyant and its squeeze on the demand for coal-fired power remained present.

Sellers remained largely optimistic about the market in June and onward, when peak-summer restocking demand is expected to provide fresh support, though much will depend on how quickly port inventories build in the coming weeks.

Import prices hover high

Seaborne imported coal prices remained elevated in China, owing to firm offers and high freight costs.

Indonesian 3,800 Kcal/kg NAR coal was offered at $67-69/t FOB for prompt Panamax shipment, with some near-term offers around $66/t. Freight rates from South Kalimantan to South China, around $12/t, have kept landed costs high, resulting in selective tender activity.

Some awards for this grade were reported in the 585-595 yuan/t CFR with VAT South China range from several major Chinese utilities. Tender failures persisted because of higher bids. Some major southern power utilities reportedly still have demand to restock as their inventories were below required levels.

In the high-CV segment, Russian 5,500 Kcal/kg NAR coal for late-May arrival into South China was discussed near 900 yuan/t, also a relatively high level. Traders said Russian supply remained restrained as a large volume was split to Japan and South Korea, where buy prices were relatively better.

Some offers for Australian 5,500 Kcal/kg NAR coal were heard at $104/t FOB, while transactions were heard at $102/t. Freight rate for Capesize vessels to South China hovered at $21-22/t or so, fluctuating in accordance with oil prices.

The import market remained largely watchful, traders said, as buyers held back despite firm offers backed by Chinese utilities' pre-summer restocking needs.