China's northern port thermal coal market started the week with subdued trading activity, as buyers adopted a wait-and-see approach following government measures aimed at boosting coal production and ensuring supply. Expectations of improving supply have weakened buying interest, making further price gains increasingly difficult.

At major Bohai-rim ports, traders continued to keep offers relatively firm as replacement costs, especially for Shanxi coal, remained high. But downstream buyers were reluctant to chase prices after authorities issued a supply-related policy notice last week. Market participants are now waiting to see how quickly the policy can translate into actual output increases.

Several participants said the latest measures heightened concerns that coal mine output could recover faster in the coming weeks, though the timing and scale of any increase remain uncertain. Some Shanxi mines have gradually resumed production, with market sources saying daily output is rising, but how quickly that recovery feeds through to port inventories remains a key uncertainty.

Recent market indications showed that prices have begun to show signs of softening, although the adjustment remained modest and isolated. A participant said 5,000 Kcal/kg NAR coal with 1% sulfur could be sold at some 3 yuan/t below the weekly average CCI 5000 index, while another reported a transaction for 5,000 Kcal/kg NAR coal with 0.7% sulfur at a similar discount.

Several participants said current transactions were mostly driven by immediate requirements, with cargoes scheduled for loading before the National Day holidays.

The divergence between quoted and traded prices has become more visible. While some sellers were still quoting around 900 yuan/t or above for 5,000 Kcal/kg NAR coal, buyers were increasingly unwilling to accept high offers amid weak consumption and uncertainty over supply recovery.

One eastern China-based participant said demand remained very limited and trading was "very quiet", with buyers mainly purchasing for immediate needs rather than building substantial inventories.

Offers for 0.6%-sulfur 5,500 Kcal/kg NAR coal were heard at around 1,000 yuan/t, while a cargo of 1%-sulfur Shanxi-origin blended coal was heard quoted at 1,025 yuan/t. Shanxi 4,500 Kcal/kg NAR coal was offered temporarily stable at about 830 yuan/t, with sources reporting challenges in selling higher but reluctance to lower prices due to high cost.

Traders said mine-mouth prices remained relatively firm, and significant price cuts would be difficult without corresponding declines in pithead prices and transportation costs. As a result, some participants expect the market to fluctuate in a narrow range, caught between rising supply expectations and still tight spot availability.

Downstream demand, meanwhile, offered almost no immediate support. Power plant coal consumption remained on a seasonal downward pattern, and several participants expected coal burn to decline further around the upcoming National Day and Mid-Autumn Festival holidays and colder temperatures throughout the rest of the month in most northern regions.

This has reduced the urgency for utilities to replenish inventories, with some buyers preferring to rely on contracted supplies while waiting for clearer signs of supply recovery.

One trader said the current round of pre-holiday restocking may be nearing its final phase; concerns about post-holiday demand have encouraged some sellers to gradually reduce inventories rather than hold large positions. If port inventories continue to build while consumption weakens, the market may have limited room for further price increases even if spot availability remains relatively tight.

Still, not all participants expect an immediate decline. Some traders are holding cargoes ahead of winter restocking, expecting domestic supply to remain tight in the near term and mine output recovery to take time.

The market is increasingly focused on the gap between policy expectations and physical supply. If mine output rises rapidly and port inventories begin to accumulate, prices could face greater downward pressure after the holiday. If production recovery is slower than expected, however, high replacement costs and limited spot availability would continue to provide a floor.

On September 21, Sxcoal's CCI index for domestic 5,500 Kcal/kg NAR coal at Qinhuangdao port was up 2 yuan/t day on day at 986 yuan/t. The index for 5,000 Kcal/kg and 4,500 Kcal/kg NAR coal at 890 yuan/t and 802 yuan/t, rising 2 yuan/t and 1 yuan/t, repsectively.

Import coal holds price edge but loses momentum

China's seaborne thermal coal market remained relatively stable, supported by the price advantage of imported coal over domestic material and firm international offers. Recent utility tenders have provided some support, although stronger expectations of domestic supply recovery have prompted some end users to delay or cancel tenders.

Indonesian 3,800 Kcal/kg NAR coal was being offered at $78-80/t FOB, while forward cargoes were offered a premium of about $3/t to the index.

Australian 5,500 Kcal/kg NAR coal was heard at $108-110/t FOB, which sources described as still competitive against domestic coal on a delivered-to-South China basis, while a transaction was heard down at $109/t. Forward cargoes were offered at $113-114/t.

Participants said some end users were increasingly reluctant to accept cargoes at current prices, particularly as they expected domestic coal supply to improve. This has limited the upside for imported coal even as overseas sellers remain reluctant to lower offers.

Some participants also said slightly more Indonesian cargoes were becoming available for late September and October loading, which could improve physical availability in China. However, higher international index levels and relatively firm seller expectations have kept replacement costs elevated.

Winter restocking could provide support to the import market later in the year, while demand from other Southeast Asian markets remains relatively resilient, according to market participants. For now, however, imported coal prices are likely to remain closely tied to developments in China's domestic market.

On September 21, the CCI index for Indonesian 3,800 Kcal/kg NAR coal stood unchanged at $76.5/t FOB and $88.5/t CFR South China port. The index for Australian 5,500 Kcal/kg NAR coal was also flat at $129/t CFR.