China's domestic portside thermal coal prices edged higher even as downstream demand stayed soft ahead of the Chinese New Year holidays, with the market being pushed up more by import-driven inflation than a genuine improvement in consumption.

Sellers at Bohai-rim ports modestly lifted offers further, encouraged by a fast rise in imported coal prices and growing expectations that domestic prices will have to reprice higher on the back of rising advantage.

Participants said overall inquiries remained inactive and mostly focused on low- and mid-CV cargoes, while non-power users only made small purchases of high-CV material. Despite thin trading, concluded deals were reported at higher levels.

On February 11, the CCI 4500 index assessing 4,500 Kcal/kg NAR coal traded at Qinhuangdao port stood at 539 yuan/t FOB with VAT, rising 4 yuan/t day on day; the CCI 5000 index was assessed at 627 yuan/t, up 4 yuan/t, and the CCI 5500 reached 706 yuan/t, also climbing 4 yuan/t.

The rally was largely being import-led, with supplies from Indonesia, China's biggest source of low-CV thermal coal, still seen as tight. Traders said Indonesian miners continued to hold back cargoes and quote aggressively, while spot availability remained constrained.

The key driver remained policy uncertainty in Indonesia, particularly the delay in finalizing RKAB approvals, which traders said has reduced miners' willingness to sell and tightened spot liquidity. Several market participants expected supply constraints to extend into March, while others argued the final approved volumes may not fall sharply, but warned the lack of clarity is enough to keep miners defensive and prices elevated.

Rumors said that the Indonesian government has granted full production quotas to select major coal mining companies on the condition that they commit at least 30% of their output upfront to supply the state power company at a regulated domestic price.

Several sources pegged Indonesian 3,800 Kcal/kg NAR offers $3.7-5/t above index, with trades heard at about $4-4.5/t above. Freight rates eased slightly, but not enough to offset the surge in FOB levels. Some traders estimated that if the rally persists, the delivered all-in costs for Indonesian 3,800 Kcal/kg NAR CFR South China could approach 500 yuan/t post-Chinese New Year holiday.

Only a handful of traders were still participating in Chinese utility tenders, and bid levels were raised sharply, aligning with fast-elevated offers from overseas miners. Several bids for 3,800 Kcal/kg NAR coal approached 490 yuan/t CFR with VAT South China, with some appearing to test above the level, sources confirmed.

The shortage in Indonesian low-CV coal also lifted Australian and Russian prices. Participants reported Australian 5,500 Kcal/kg NAR deals around $82/t FOB, with CFR South China costs estimated near 750 yuan/t, inclusive of VAT. Utilities were said to be counterbidding some 740 yuan/t, but importers were reluctant to sell, citing expectations of further increases.

Despite the boost from the import market, the strength in domestic prices is running into a clear demand ceiling.

End-user consumption has weakened as industrial users shut down for the CNY holiday. At the same time, stronger wind and solar generation have squeezed thermal power demand, pulling down utility coal burns. As a result, coal stock drawdowns slowed and utilities' spot appetite remained subdued, with most procurement limited to essential replenishment.

Sources said sentiment was still relatively bullish, but also noted that the upcoming holiday will likely cap near-term volatility because many traders have already withdrawn from the market, and non-power demand is particularly weak.

Traders said the market will face more uncertainties in the near term. The main variables include how aggressively ports rebuild inventories after the break, and the pace at which upstream miners and downstream users resume operations.

If import prices stay high and arbitrage opportunities remain limited, domestic coal may regain market share in South China after the holiday.