Indonesia's expected production cuts spurred a recovery in Chinese domestic thermal coal prices as supply concerns led some buyers to shift to domestic sources. However, approaching Spring Festival holidays, weak demand and high inventories will likely limit further price increases, with market participants anticipating a cautious post-festival rebound.

Prices for major thermal coal grades climbed modestly at northern ports. Low-sulfur 4,500 Kcal/kg NAR coal was offered at 540-550 yuan/t FOB with VAT. Inquiries were still heard, yet transactions were scarce. Offers of 5,000 Kcal/kg grade were also underpinned, with a few sellers raising prices for low-sulfur cargoes by 10 yuan/t day on day to 630 yuan/t.

Prices of higher-CV coal were less firm. A 5,500 Kcal/kg NAR coal cargo with 1% sulfur was offered at 703 yuan/t, with the seller open to negotiation.

"Indonesia's still pending RKAB mining quota permits have lit a fire under sentiment in both import and domestic markets, making it tough for domestic prices to fall in the near term," said a Zhejiang-based trader source. "However, a significant rise seems unlikely, especially as demand cools before the holiday."

Trader sources generally reported low availability of spot cargoes from Indonesia, with some overseas miners holding back on sales while waiting for more clarity from their energy ministry.

"Tight availability from Indonesia and price rally have prompted certain power utilities in southern China to shift to other seaborne supplies or domestic cargoes," said a Guangdong-based source, adding that reduced freight rates from north to south ports make domestic shipments more competitive against imports.

Sxcoal calculated on February 5 that Indonesian 3,800 Kcal/kg NAR coal lost price competitiveness over domestic 4,500 Kcal/kg NAR coal for two consecutive days, on a delivered to South China and CV-converted basis. The trend appears to be tracking the year-ago trajectory, potentially leading to similar sluggish import demand should seaborne cargoes further lose advantage.

Indonesia's delayed issuance of RKAB mining permits and widely circulated rumors about 40-70% cuts on some miners' production quotas have sent imported coal prices soaring, with 3,800 Kcal/kg NAR offers $3/t above the benchmark index on a FOB basis.

Chinese power plants continued to secure cargoes of Indonesian low-CV coal, with awarded prices for 3,800 Kcal/kg NAR coal climbing to around 458-463 yuan/t CFR China with VAT, netting back to $51.9-52.5/t FOB East Kalimantan on a Panamax basis with delivery in February 19-28, Sxcoal's tracking data showed.

A few sources anticipated the ongoing seaborne coal price rally could fizzle later, if miners ramp up supply before taking the Ramadan holiday.

In addition to the spillover support from the import market, continued coal inventory drawdown at major Bohai-rim ports in northern China also bolstered positive bets, although transactions remained sparse. Downstream users and speculators are sticking to as-needed purchases, wary of overpaying ahead of the February holiday.

Total stocks at Qinhuangdao, Caofeidian, Jingtang, and Huanghua ports stood at 24.34 million tonnes as of February 5, down 9.6% month on month and falling below the year-ago level by 5.4%.

One Zhejiang-based trader source warned risks chasing highs, citing that post-holiday demand remains anyone's guess. Chinese major state-run mines only arrange several days' holiday off for maintenance, while non-state-run mines are expected to resume full operations by late February to early March, potentially flooding supply if demand from end users fails to revive.