Indonesian supply constraints and rising seaborne thermal coal prices have increased import costs for Chinese buyers. Some traders warn this squeeze could continue into the second quarter, bolstering China's domestic market. 

Sources said Indonesian coal availability has reduced markedly, with prompt shipments limited and April volumes largely unavailable as miners measured supplies to the export market. Some attributed the tightness to delays in Indonesian RKAB approvals by the energy ministry, which have slowed output and shipments. The disruption coincides with the arrival of Ramadan, further clouding near-term supply.

Offers of Indonesian 3,800 Kcal/kg NAR coal soared in the seaborne market, rising by some $6-7/t compared with the pre-Spring Festival levels. Panamax cargoes for this grade were reportedly quoted $7-10/t above benchmark indexes, while transactions were heard at $55-56/t FOB, sources said.

Chinese traders were facing stiff competition from other Asian buyers. "China is currently bidding at the lowest levels in the region, while India and South Korea are paying more," said one major Chinese importer source. "Prices are anticipated to further rise if Indonesian supply fails to recover and demand gradually rebounds in China post-holiday."

Additionally, sources reported tight supply to Indonesia's domestic power plants, adding another layer of pressure on the future export availability and upward momentum on prices.

On February 24, the CCI index for Indonesian 3,800 Kcal/kg NAR coal stood at $55.5/t FOB, rising by $2/t compared with the pre-holiday level and hitting the highest level since June 5, 2024.

China domestic prices supported

Rising Indonesian thermal coal prices have boosted demand for Chinese domestic coal, particularly at northern ports, as higher seaborne costs led end users to seek more competitive local supplies.

One southern power plant reportedly bought a 70,000-tonne cargo of Shanxi 5,000 Kcal/kg NAR coal with sulfur below 1% at 655 yuan/t FOB with VAT northern ports during the holiday, for delivery before March 5.

"Delayed arrivals of seaborne coal and elevated import costs discourage seaborne purchases, prompting utilities to turn to domestic alternatives," one Fujian-based importer source explained.

Participants largely adopted a thick wait-and-see stance at the first workday post-holiday, with offers of 5,000 Kcal/kg NAR coal staying mostly at a range of 670-680 yuan/t FOB and certain premium resources testing 700 yuan/t. Cargoes of 4,500 Kcal/kg NAR coal were offered at 560-570 yuan/t. 

Power plants' indicative buying levels were at index parity, while transactions stayed temporarily weak.

China's thermal coal market was characterized by subdued demand during the holiday, with coal burn at power plants falling sharply amid warmer weather and widespread industrial shutdowns. As industrial activity resumes and agricultural demand picks up, coal consumption is likely to rebound from holiday lows, though high utility inventories may cap the pace of spot procurement.

Coal inventories at most northern ports were relatively stable during the holiday, offering certain support to prices. Sxcoal's data showed that the total coal stocks at Qinhuangdao, Caofeidian, Jingtang, and Huanghua ports stood at 23.80 million tonnes on February 24, marking a 0.03% dip week on week and falling 8.48% compared with the month prior.

Stockpiles at Qinhuangdao dropped nearly 10% from pre-holiday level to 4.92 million tonnes, while Caofeidian saw a modest increase, reflecting steady long-term contract delivery but muted spot trading.

Most traders expect domestic prices to remain resilient through the end of the month, supported by tight Indonesian coal supply and expanding domestic coal price advantage, despite anticipated moderate demand from inland power plants.