China's seaborne import thermal coal market remained split approaching the end of the week, with prompt spot cargoes under sustained downward pressure while forward supplies drew broadly bullish sentiment from most participants.

Southern ports continued to experience congestion as successive cargo arrivals kept supplies ample, weighing on prompt prices. Utilities have already pushed tender prices for June-delivering Indonesian 3,800 Kcal/kg NAR coal to around 590-600 yuan/t CFR South China with VAT, with some power plants unwilling to accept even at those levels, preferring instead to hold out for July cargoes.

One bid to a utility tender for Indonesian 3,800 Kcal/kg NAR coal was heard on June 11 at 593 yuan/t, netting back to around $66.13/t FOB on a Panamax basis.

"The prompt market is weak for now, but most participants are still bullish on July and beyond delivering prices," one South China-based importer source said. "It's just a matter of waiting for the congestion to clear and for domestic coal prices to catch up. "Most participants expect the current southern port congestion to ease by end-June, with July widely seen as a potential turning point for prices."

Indonesian miners largely showed little inclination to lower their prices, backing some traders offering July-August-delivering 3,800 Kcal/kg NAR coal firmly at $70-73/t FOB.

Panamax freight from South Kalimantan to China came in at approximately $11/t, down from recent highs, helping to reverse the Indonesian supply's disadvantage.

On June 11, Sxcoal's estimate showed that Indonesian 3,800 Kcal/kg NAR coal gained a marginal price edge of 3 yuan/t compared to China's domestic equivalent, on a CV-adjusted and delivered-to-South China basis, compared to a 6.8 yuan/t disadvantage in the week prior.

Historical data show that since early February this year, this imported grade has been at a price disadvantage for most of the time, with the gap widening to as much as 44.65 yuan/t in mid-March. 

Sources said market discussion during the Coaltrans China centered heavily on Indonesian RKAB production quota developments. Several participants said they expected formal approvals to be unlikely before August or September. Larger miners were seen as the key volume drivers, while smaller producers were described as needing incremental relief to avoid curtailing operations.

Some sources also warned of potential supply disruption from Indonesia in the mid-term due to El Nino effect, adding another layer of support to Indonesian coal prices. The National Oceanic and Atmospheric Administration in the U.S. on June 11 declared that an El Nino has developed in the tropical Pacific, issuing an El Nino Advisory, with the potential to develop into a very strong event.

El Nino typically brings prolonged dry conditions to Kalimantan, the heartland of Indonesia's thermal coal base, with river water levels on key inland waterways falling sharply during severe drought periods. This could disrupt coal barges to reduce loads and delay supply.

On the high-CV segment, Australian 5,500 Kcal/kg NAR coal remained prohibitively expensive for most Chinese buyers. Offers for 5,500 Kcal/kg NAR coal were heard at $105-106/t FOB, translating to a landed cost of above 970 yuan/t. "This is well above the 930-yuan/t-or-so level at which domestic traders were reselling to end users through tenders, making arbitrage economics unworkable," a Fujian-based trader source said.

On a CFR basis, Australian 5,500 Kcal/kg NAR coal was heard offered above $125/t. Capesize freight rates from Australian Newcastle port to South China eased to around $19/t, sources said.

Sentiment was more constructive for forward positions. Australian 5,500 Kcal/kg NAR coal for August-October shipment was offered at $110/t FOB, with Japanese and South Korean buyers reported to be taking positions as far out as the first quarter of next year.

Coal consumption at power plants under China's six major coastal power groups remained elevated relative to the same period in prior years, though the pace was volatile. Stockpiles at those facilities continued to build, but remained below historical norms for this time of year.

On June 12, the CCI index remained stable for Indonesian 3,800 Kcal/kg NAR coal at $67/t FOB and $79.5/t CFR. Australian 5,500 Kcal/kg NAR coal also held steady at $125/t CFR.

Domestic prices hold firm

China's northern port thermal coal market remained in a standoff on the same day, with sellers maintaining offers and buyers pushing back, leaving turnover thin across most grades.

Safety inspections at mines in Shanxi remained stringent, constraining output and pushing up coal prices to be delivered to northern ports. Inspection teams have also recently entered Inner Mongolia, where traders said production at some mines was likely to be affected.

The supply-side squeeze has provided cost and certain sentimental support to the portside market, encouraging sellers to maintain offers despite long-standing tepid demand and liquidity. However, it has so far failed to translate into price gains, with port stocks remaining elevated and some traders with vessel-clearance pressure offering marginal discounts to move cargo, though few were willing to sell at deeply distressed levels.

Unblended low-sulfur Shanxi 5,000 Kcal/kg NAR coal was heard offered at an index plus 10 yuan/t, with sellers reluctant to offload into weakness due to increased difficulties in securing supply. Some 1%-sulfur same-CV coal was offered roughly flat, at a 3-5 yuan/t discount to the CCI 5000.

A trade of low-sulfur 5,500 Kcal/kg NAR Inner Mongolian coal was heard at 875 yuan/t, FOB northern ports with VAT, with sellers reporting increased trading pressure at higher levels. One 4,500 Kcal/kg NAR coal cargo was heard offered at a slightly higher price of 680 yuan/t, delivered to ports with VAT, with some traders reluctant to sell in anticipation of future price rises.

On June 12, the CCI Index for 5,500 Kcal/kg NAR coal stood at 865 yuan/t FOB with VAT, flat for six consecutive trading days; the index for 5,000 Kcal/kg NAR coal was unchanged at 774 yuan/t for seven sessions, and 4,500 Kcal/kg NAR coal was also steady at 675 yuan/t for the eighth trading day.