China's thermal coal market at northern transshipment ports found a tentative support from speculative trades, which sent transaction prices slightly higher, even as the overall upward momentum was capped by end users maintaining only rigid purchases.

On April 13, the CCI index for 5,500 Kcal/kg NAR coal traded at Qinhuangdao port stood at 766 yuan/t FOB with VAT, up 2 yuan/t day on day; the index for 5,000 Kcal/kg rose 2 yuan/t and 4,500 Kcal/kg NAR coal grew 1 yuan/t to 681 yuan/t and 591 yuan/t, respectively.

Sources said that a few traders have been actively buying and selling, betting that reduced port supply and high port inventory replacement costs will support the market through the off-season.

"The transaction prices are definitely moving upward," a Zhejiang-based trader source said, reporting a deal for 5,000 Kcal/kg NAR coal with 0.8% sulfur at 696 yuan/t on a delivered-to-port basis. "Low-sulfur, high-quality coal is still in demand, making its prices hard to decline."

Another trade for 0.6%-sulfur 4,500 Kcal/kg NAR Shanxi coal was heard at 600 yuan/t, FOB northern ports with VAT, while a same-CV cargo with slightly higher sulfur was settled at 605-606 yuan/t, delivered to ports.

The ongoing month-long spring maintenance on the Daqin railway tightened supply into major Bohai-rim ports and nudged inventories lower, underpinning offers at ports. The combined stocks at major northern ports on April 10 fell by nearly 4% compared with the pre-maintenance level, Sxcoal's data showed.

Meanwhile, higher all-in delivered costs provided floor support, with Sxcoal's assessment showing portside 5,500 Kcal/kg NAR coal prices were 28 yuan/t lower than estimated costs of coal from main production areas as of April 13.

"Despite higher trading prices, the overall strength remains fragile as utility buying remains constrained during the off-season," a Tianjin-based trader source warned, citing below-year-ago level coal consumption at power plants as a key reason.

A few traders were heard to have sought liquidation, feeling demand was weak and stockpiling carried risk, sources confirmed.

While further rises may not be meaningful during the shoulder season, spot prices are also unlikely to retreat with the growing uncertainties in the import market and high overseas offers.

Imported coal lacks price edge

Imported thermal coal prices rose further higher in China late last week, backed by a wave of utility tenders. However, this resulted in a widened disadvantage of seaborne coal cargoes, keeping future utility buying in check.

Sxcoal calculated that Indonesian 3,800 Kcal/kg NAR coal exceeded China's domestic equivalents by nearly 15 yuan/t, on a delivered to South China and CV-adjusted basis, as of April 13, with the spread widening by 5.3 yuan/t compared with the week-ago level.

Indonesian sellers were holding offers firm, owing to reduced export availability amid elevated requirements for domestic market obligations (DMO). Cargoes of 3,800 Kcal/kg NAR coal were heard offered at $62-63/t FOB at the start of this week, while Panamax freight from South Kalimantan to South China stood at a high level of around $10.50/t.

A southern utility recently awarded a 3,800 Kcal/kg NAR cargo at 549 yuan/t CFR South China with VAT for late April and May delivery, rising 9 yuan/t than its previous tender, while another utility awarded a cargo at 552 yuan/t, also a notable increase, sources said. That nets back to around $61/t FOB, indicating a negative arbitrage relative to miner offers.

"With no arbitrage window, it is hard to buy or sell," confirmed a Fujian-based trader source. "Some Indonesian cargoes originally destined for export are being diverted to domestic market. The Indonesian government wants coal prices to rise to collect more taxes, while still ensuring domestic supply, adding difficulties in trading."

"Domestic buyers aren't purchasing much 3,800 Kcal/kg NAR coal, so trader appetite is only average. But with overseas prices high, offers are hard to go down," said a buyer source with a state-run power utility.

Australian 5,500 Kcal/kg NAR coal also remained under selling pressure in China. A Xiamen-based trader source reportedly sold this material to a utility at 810 yuan/t for late-May delivery, but at a loss with costs at around 830 yuan/t.