China's domestic thermal coal market at northern ports extended its upward momentum on August 5, buoyed by persisting supply constraints from production areas and ongoing inventory destocking at ports, though participants remained divided on the sustainability of the rally as end users showed limited willingness to chase higher prices.

The supply-side narrative remained the primary driver, with safety inspections in Shanxi continuing to constrain mine output despite reports of a gradual resumption at some operations. Sources disclosed that a significant portion of high-quality, low-sulfur Shanxi coal has effectively been diverted to captive use by major state-owned producers, compounding the scarcity of spot supplies at northern transfer ports.

Northern ports continued their inventory drawdown, with combined stocks at Qinhuangdao, Caofeidian, Jingtang, and Huanghua ports falling for eight consecutive days to 26.98 million tonnes by August 5, the lowest since May 6, 2026.

Rail coal inflows hovered at a low level, as the cost inversion between all-in delivered costs and port prices discouraged trader shipments. On August 5, coal artery Daqin line delivered 1.04 million tonnes of coal, staying at a relatively low level, data showed.

However, the physical market's strength did not drive transaction activity. Several traders noted that while offer prices climbed, actual trading volumes remained thin, with many end users retreating to the sidelines after covering near-term requirements.

"The market is relatively quiet and subdued. There are not many buyers and only sporadic purchases, primarily to meet rigid demand," one northern China-based trader source observed, adding that offers for 1%-sulfur 4,500 Kcal/kg NAR material at 685 yuan/t were struggling to find takers.

Another participant reckoned that a wave of cargoes could be released once the CCI 5000 index surpasses 760 yuan/t, potentially capping further upside.

The demand outlook remained clouded by several countervailing factors. While a summer heatwave pushed power demand across northern, northeastern, and eastern China to record highs earlier this week, as confirmed by the State Grid Corporation on August 4, meteorological forecasts warn that approaching Typhoon Dolphin will bring heavy rainfall to eastern and coastal northern provinces later this week. This weather shift could depress cooling demand and slow the pace of port destocking.

Moreover, power plant inventories, though declining, remained above year-earlier levels, with many utilities adopting a measured replenishment strategy and relying on long-term contract coal rather than chasing spot cargoes.

On August 5, the CCI index for domestic 5,500 Kcal/kg NAR coal at Qinhuangdao port was assessed at 839 yuan/t, FOB with VAT, rising 5 yuan/t day on day. The index for 5,000 Kcal/kg NAR and 4,500 Kcal/kg NAR coal rose 5 yuan/t and 6 yuan/t, respectively, to 750 yuan/t and 661 yuan/t.

Import market gains traction

The seaborne import thermal coal market moved largely in tandem with domestic prices, though participants noted a more cautious undertone.

Transaction prices for Indonesian 3,800 Kcal/kg NAR coal went up further to $65.5/t FOB for Panamax vessels, with freight rates from South Kalimantan to South China at approximately $9.7/t.

A recent tender by a southern utility for September-delivery cargoes saw bids at 560-567 yuan/t on a CFR South China basis with VAT, which would indicate a loss for importers at prevailing FOB levels and freight costs.

On the high-CV front, Australian 5,500 Kcal/kg NAR coal was offered at $95-96/t FOB, with Capesize freight from Australia's east coast to South China hovering at $20-20.5/t.

However, bloated inventories at southern China's Guangzhou port added a layer of uncertainty, potentially capping the overall upward space for imported coal prices.

Sxcoal's data showed that the port held 3.46 million tonnes of coal as of August 4, climbing 6.7% month on month and exceeding the year-ago level by 18.2%, sitting at the highest level for the same period in the past several years.

Some participants warned that with the peak summer season entering its final phase and Indonesian RKAB approvals expected to provide greater supply clarity by mid-August, the market may struggle to maintain its upward trend without a clear increase in demand.

On August 5, the CCI index for Indonesian 3,800 Kcal/kg NAR coal stood at $64/t FOB and $75/t CFR South China port, both rising $0.5/t compared with a day earlier. The index for Australian 5,500 Kcal/kg NAR coal was at $114/t CFR, up $0.7/t on the day.