Thermal coal market at northern China ports kicked off the week in quiet transactions, as sellers resisted cutting offers while buyers sat on the sidelines. Yet, many participants remained optimistic about summer demand perspective.

Though a few sellers willing to lock in profits were ready to boost offtakes, spot trading activity was still trapped in a stalemate, with purchases mainly driven by short-covering demand for mid-month deliveries. Market inquiries were sparse. "No one is willing to sell cheap, so we're just stuck in this standoff," a trader in Hebei's Tangshan told Sxcoal.

"Our 5,500 Kcal/kg NAR thermal coal is offered at 860 yuan/t (FOB with VAT), but that barely covers costs. We have retreated from the market recently," said a Shanxi-based trader.

Market sentiment was somewhat divided following a week-long stagnation. On the one hand, partial participants maintained the upward potential.

Railway operators withdrew freight rate discounts in some regions, raising the cost of coal arrivals to northern ports. Several traders who secured cargoes at elevated levels were reluctant to undersell.

Moreover, inventory accumulation at northern ports was relatively slower than anticipated. Coal stocks at Qinhuangdao, Jingtang, and Caofeidian ports totaled 25.53 million tonnes on May 18, 15.10% lower than the year-ago level, Sxcoal data showed.

With long-term contract coal shipments dominating rail arrivals and premium spot resources remaining scarce, the structural tightness persisted. A coal producer noted that term contract commitments absorbed most available tonnage, leaving minimal spot coal for trading.

Meanwhile, the approaching summer peak offered additional support. Despite substitution pressure from renewables, the expected El Nino across Southeast Asia and seasonal cooling demand are likely to drive higher fuel consumption by power generators.

Coal inventories at major coastal and inland power plants hovered at relatively low levels as of May 14, 0.5-2.9% less than the same period last year. "Once temperatures rise, end users are likely to come back to the spot market," according to a Shanxi-based insider. This would keep a floor under portside thermal coal prices.

However, downstream buyers also avoided high prices, increasingly adopting a wait-and-see stance. Some participants hence anticipated modest pullbacks before any rallies.

They argued that power plant restocking was in no hurry. With coal burns yet to climb up significantly, generators were mainly draw on term contract supplies rather than fresh buys.

A power plant in Shandong was just one day short of the 40-day coal inventory target, with most cargoes fulfilled through contracted volumes. "Spot resources are too expensive," the source said.

In addition, partial participants warned that if persistent rainfall dampens coal production or slows portside turnover, near-term transaction volumes could face further headwinds.

The emerging softness in major producing regions also weighed on portside sentiment. Several mines across Shaanxi and Inner Mongolia trimmed offers by 5-20 yuan/t, as shipments to railway stations lost momentum. Mine-mouth dips could gradually erode the cost basis for cargoes arriving at northern ports.

On the import front, mid- and high-CV Indonesian coal remained largely unworkable into China given prevailing domestic price levels. Domestic supplies at northern ports will run strong in the short run. As a result, portside prices are likely to be range-bound, affected by these intertwined factors.

As of May 18, the CCI index for domestic 5,500 Kcal/kg NAR thermal coal traded at Qinhuangdao port was assessed by Sxcoal at 835 yuan/t FOB with VAT, unchanged compared to late last week. The index for 5,000 Kcal/kg and 4,500 Kcal/kg NAR grade also kept flat at 748 yuan/t and 651 yuan/t, respectively.