China's northern port thermal coal market has softened decisively this week, as prices faced mounting pressure from persistently lackluster downstream demand, a sharp pullback in coastal freight rates, and elevated stockpiles.

Offers for 0.6%-sulfur 5,000 Kcal/kg NAR coal at northern transfer hubs were heard at 760 yuan/t or so FOB with VAT, down from around 780 yuan/t seen earlier this month, while bids from downstream buyers were largely confined to 755 yuan/t or lower.

Some trader sources extended their price pullbacks from earlier week 3-5 yuan/t discounts to the CCI 5000 index for high-sulfur same-CV coal to a 6 yuan/t or so discount, but still felt challenging in attracting buying interests.

"We've seen very few inquiries this week. Even those who ask are pitching prices well below current spot offers," said a source at a northern China-based major trading firm, adding that sellers were increasingly reluctant to hold offers amid a dearth of visible demand.

The erosion of buying interest has been exacerbated by a collapse in coastal shipping costs, intensifying a wait-and-see sentiment among downstream users.

Sxcoal's data showed that the freight rate from Qinhuangdao port in northern China to Zhangjiagang port at the lower reaches of the Yangtze River declined by 13.6 yuan/t or 27.6% as of June 23 from the pre-Dragon Boat Festival level on June 18. Other routes also saw an accelerated decline in the past several days.

The weakness was also seen in the high-CV segment. Offers for 5,500 Kcal/kg NAR coal (S 0.4%) at northern ports were heard around 840-850 yuan/t, with some offers negotiable. "The prices are largely nominal given the absence of any takers," said a second trader source in northern China. He cautioned of further declines in the following days.

In lower-CV segment, one trader source submitted bids for 4,500 Kcal/kg NAR coal to tenders from utilities along the Yangtze River ports at 697 yuan/t CFR with VAT, netting back to below 670 yuan/t FOB northern ports. This marked a 5 yuan/t or so decline from earlier this week.

The market's gloom was also partly ascribed to stubbornly high port inventories and underperformed power consumption.

Combined coal stocks at the four key northern transhipment hubs, Qinhuangdao, Caofeidian, Jingtang and Huanghua, stood at 28.44 million tonnes as of June 24, down merely 0.15% week on week and still hovering near historical highs for this time of year, Sxcoal's data showed.

The demand side saw an equally uninspiring picture. Coal consumption at power plants under six major Chinese coastal power groups has bucked typical seasonal trends, sliding 8.8% from an early-June peak and sinking to a multi-year trough for the same period. The sluggish burn rate has allowed power plants to rebuild inventories at a rapid clip, reducing their urgency to secure spot cargoes and reinforcing the bearish tone across the spot market.

"Most utilities rely on term contract volumes while adopting a bargain-hunting approach to spot cargoes," a Beijing-based participant said. "The demand side won't meaningfully recover until we see a sustained heatwave push up air-conditioning loads, probably not until late July or August."

Some participants anticipated a correction of 20-30 yuan/t from current levels before any stabilization could take hold. The direction will ultimately hinge on weather patterns and their impact on power demand, as well as any supply-side adjustments from domestic producers after the end of the June Work Safety Month.

On June 24, the CCI Index for 5,500 Kcal/kg NAR coal stood at 860 yuan/t FOB with VAT, down 3 yuan/t day on day; the index for 5,000 Kcal/kg NAR coal dipped 3 yuan/t to 768 yuan/t, and 4,500 Kcal/kg NAR coal was at 668 yuan/t, also down 3 yuan/t on the day.

Import coal edges re-emerge

The influx of low-priced imported coal has, in some ways, amplified the softening in domestic prices. Some prompt Indonesian low-CV cargoes have been arriving in sizeable volumes. While this was exacerbating congestion at already swelled southern ports, it also accelerated further downward corrections of the seaborne market.

Sxcoal's data showed that coal stocks at Guangzhou port reached 3.20 million tonnes on June 23, rising 8% from the start of the month and reaching the highest since August 6, 2024. Some sources reported a discharge waiting time of about 15 days in certain terminals of southern ports, which has started to weigh on their confidence for the entire July market.

Meanwhile, international freight rates dropped meaningfully, following the easing of Middle East tensions. The rate for Panamax vessels from South Kalimantan to South China slid to $8/t, down from $12/t in early June. while the rate from Australia's Newcastle to South China stood at $15/t or so for Panamax vessels and $12-13/t for Capesize vessels, compared to $22-23/t earlier this month.

This brought the all-in-delivered costs to South China lower. Therefore, traders' bidding prices to domestic utility tenders for Indonesian 3,800 Kcal/kg NAR coal drifted to as low as 575 yuan/t, CFR South China with VAT, translating to slightly over $60/t FOB on a Panamax basis. This represented a significant decline from over 600 yuan/t mid-month, according to Sxcoal's tracking data.

High-CV Australian coal tender prices fell, with bids in the 876–885 yuan/t range CFR South China including VAT; the lowest price nets back to roughly $96.5/t FOB on a Capesize basis.

On June 24, the CCI index for Indonesian 3,800 Kcal/kg NAR coal was at $65/t FOB and $75/t CFR, both falling $0.5/t day on day. The index for Australian 5,500 Kcal/kg NAR coal was at $118.5/t CFR, down $2/t from a day ago.

A significant decline in seaborne imported coal prices has started to enhance their competitiveness against China's domestic equivalents.

Sxcoal's estimate on June 23 showed that Indonesian 3,800 Kcal/kg NAR coal enjoyed a delivered-to-South China advantage of 25.7 yuan/t, widening by a significant 21 yuan/t week on week. Australian 5,500 Kcal/kg NAR coal remained in a marginal 1.6 yuan/t disadvantage relative to domestic equivalent, with the gap closing sharply by 24.3 yuan/t from the week-ago levels.

Traders noted that the arbitrage window has widened again for seaborne cargoes, potentially capping any upside for spot prices at northern China ports in the near term