Indonesian thermal coal is experiencing a widening price disadvantage compared with Chinese domestic coal, as firm FOB offers coupled with surging seaborne freight rates pushed the delivered prices to South China to an over 20-month high.

Sxcoal's estimate on March 2 showed that Indonesian 3,800 Kcal/kg NAR coal was 24.81 yuan/t more expensive compared with Chinese domestic 4,500 Kcal/kg NAR coal on a CV-adjusted and delivered-to-South China basis, marking the weakest since June 13, 2023. The spread expanded by 32 yuan/t compared with the month prior.

While the robust rising momentum of offer prices from Indonesian sellers, driven by a lack of clarity on the 2026 RKAB mining quota and the government's plan to rein in supply to boost prices, was the primary reason, the recent surge in seaborne freight rates has further deepened the price gap.

Surging oil prices after the escalation of the Middle East crisis drive a sharp rise to near $9/t in Panamax freight rates from South Kalimantan to South China ports, participants said. The index assessing the Panamax freight rate from East Kalimantan to South China has climbed by 17.6% month on month, reaching the highest since mid-December 2025.

"Import costs are climbing fast, leaving more domestic end users increasingly reluctant to make inquiries," said a trader source in Xiamen, southeastern China's Fujian province.

Meanwhile, following approvals of RKAB mining quotas for a few large coal producers in Indonesia, sources said more miners are expected to receive approvals this week.

"Once approvals are finalized, vessel line-ups should ease, though the rising oil prices may keep freight rates elevated and import costs firm, which may still discourage some end users from buying," said a Guangdong-based trader source.

Sources also disclosed that elevated delivered costs have forced more buyers to seek domestic coal. "Plants have no choice but to switch to domestic supply," said a Guangdong-based power plant source.

The widening import disadvantage is providing some floor for Chinese domestic prices despite soft fundamentals. At northern ports, however, sentiment turned cautious this week following fast rises during the post-Chinese New Year holiday week.

Some traders holding sizable stocks began offering discounts to benchmark CCI indexes to move volume before the traditional March low-demand period. A cargo of 350,000 tonnes of Shanxi-origin 5,000 Kcal/kg NAR coal with 0.8% sulfur was heard sold at 672 yuan/t FOB with VAT northern port to an end user, down slightly from a similar trade at 675 yuan/t a day earlier.

Downstream acceptance for elevated prices remained weak. One Tianjin-based trader source reported difficulty selling 5,500 Kcal/kg NAR material at 755 yuan/t, noting increasing shipments from mines. "We expect prices to stabilize in the near term," he added.

A buying indication for next week-delivering 0.8%-sulfur 4,900 Kcal/kg NAR Ordos coal was heard at an index-parity, while offers were heard roughly 3-5 yuan/t above the benchmark. One deal was heard settled equivalent to a 7 yuan/t premium to the CCI 4500 index for Inner Mongolian 4,500 Kcal/kg NAR coal through a utility tender at the start of the week.

Participants attributed recent domestic price firmness mainly to Indonesia's RKAB quota issues, though they noted the impact was likely overstated.

"Even with Indonesian cuts, annual supply-demand would remain relatively balanced," a Jiangsu-based power plant source said. "New coal mine capacity is relatively high, rail shipments are rising, and power plants are sitting on high inventories, fulfilling long-term contracts and showing little urgency to buy spot supplies."

Some other participants shared this view, anticipating that typical March off-season psychology would trigger profit-taking, limiting price increases.

On March 3, the CCI Index for 5,500 Kcal/kg NAR coal traded at Qinhuangdao port stood at 752 yuan/t and 5,000 Kcal/kg NAR coal was assessed at 673 yuan/t, both unchanged day on day. The index for 4,500 Kcal/kg NAR coal was also flat at 581 yuan/t.

On the same day, the CCI index assessing Indonesian 3,800 Kcal/kg NAR coal stood at $58/t FOB, standing still from a day earlier. The index for Australian 5,500 Kcal/kg NAR coal was also stable $103/t CFR.