China's domestic thermal coal market remained firm at major northern transfer ports on September 7, with tight spot availability and elevated replacement costs continuing to underpin prices, yet growing caution among buyers and signs of weakening at the mining end may lead to a slower upward pace this week.

Participants said the supply-demand balance remains tight enough to keep prices supported. However, a lack of robust downstream buying and growing doubts over the rally's sustainability have made traders increasingly selective about chasing the market at current levels.

At northern ports, spot thermal coal prices were held largely firm, with sources reporting that 5,000 Kcal/kg NAR coal below 900 yuan/t, FOB with VAT, was difficult to source. One cargo of Shanxi low-sulfur 5,000 Kcal/kg NAR coal was heard to have traded at 910 yuan/t or so, while a 1%-sulfur deal was reported at 908 yuan/t.

Some offers for low-sulfur Shanxi 5,000 Kcal/kg NAR coal were heard at 920 yuan/t. Sources said the firm pricing reflected not only tight spot availability but also the high cost of replenishing stocks, leaving traders with little incentive to ease offers.

Supply constraints remained evident at northern ports. Miners prioritize supply of long-term contract coal, limiting the overall volume supplied for the portside spot market, while poor economics in shipping coal to ports for sale also curbed the flow.

Sxcoal's data showed that daily rail coal inflows to Qinhuangdao, Caofeidian, Jingtang, and Huanghua ports averaged 1.33 million tonnes during the week ended September 4, falling 18.4% week on week and down 24.3% compared with the month-ago level. This sustained a destocking mode, dragging the combined stocks at these ports down 5.83% week on week and 13.07% month on month to 23.79 million tonnes.

A recent transaction for Inner Mongolian 5,500 Kcal/kg NAR coal was reported at 1,020 yuan/t, FOB with VAT, while one Inner Mongolia seller said its delivered-to-port cost had reached around 1,100 yuan/t, sharply reducing its willingness to replenish port inventories. The lack of arbitrage has kept traders reluctant to move large volumes into the ports, which could further limit arrivals in the near term and provide support to spot prices.

While the market remains fundamentally supported by constrained spot supply and high replacement costs, the increasingly cautious response from power plants and traders could potentially limit the market's ability to extend its recent rally at the same pace.

Several participants noted that the market became increasingly two-sided. Some traders were looking to lock in profits after the sharp rally, particularly as port prices have moved to levels where downstream buyers are less willing to accept.

Sources reported increased sales to major trading platforms, suggesting that sellers were finding it increasingly important to secure reliable outlets. The willingness of some traders to sell at slightly discounted levels also indicated that expectations of further strong price increases have begun to ease.

Meanwhile, power plant coal consumption has eased in early September, particularly along the coast, and some utilities appear willing to wait rather than chase the market higher. This has increased the risk for the current rally to lose momentum if port inventories don't decline as expected or if production-area supply recovers sustainably.

The production-area market has already shown signs of cooling, likely adding caution to the portside market. Some coal mines in Shaanxi started cutting prices over the weekend, as elevated prices faced increased resistance from buyers and made high-priced cargoes more difficult to move.

Sxcoal's real-time thermal coal market sentiment index, primarily used to monitor the short-term outlook of thermal coal market participants, stood at 0.53 as of 17:00 on September 7, down significantly from 0.98 registered on September 4, indicating that overall market sentiment retreated obviously, though still in a zone that signals bullishness.

On September 7, Sxcoal's CCI index for domestic 5,500 Kcal/kg NAR coal at Qinhuangdao port rose 20 yuan/t from late last week to 967 yuan/t. The index for 5,000 Kcal/kg NAR coal increased by 18 yuan/t to 872 yuan/t, while the index for 4,500 Kcal/kg NAR coal climbed by the same amount to 789 yuan/t.

The import market faced a similar tension between tight overseas availability and increasingly cautious Chinese buyers.

Australian 5,500 Kcal/kg NAR coal was reportedly traded around $113/t FOB, with offers subsequently rising to about $115/t FOB, while Panamax freight rates have climbed to $22/t or so, keeping delivered costs elevated.

Indonesian coal has also remained expensive, with 3,800 Kcal/kg NAR coal offered at $81-82/t FOB and recent trades reaching the upper end of that range. Some traders still position for fourth-quarter requirements, betting international prices could rise, while others have begun releasing cargoes instead of chasing the market.

Coastal power plant demand remained weak, and a number of tenders were aborted as bidding prices exceeded utility-set price ceilings, leaving a widening gap between high seller expectations and actual downstream appetite.

Data showed coal consumption at power plants under six major power groups declined by 7.27% week on week and 6.28% on the month as of September 4. Declining temperatures are likely to further weigh on consumption at power plants this month.

On September 7, the CCI index for Indonesian 3,800 Kcal/kg NAR coal stood at $79/t FOB and $90.5/t CFR South China port, both rising by $0.5/t from late last week. The index for Australian 5,500 Kcal/kg NAR coal gained $2/t on the day to $133/t CFR.