China's domestic thermal coal market at northern transfer ports remained locked in a stalemate, with firm production costs continuing to support offers while weak procurement activity prevented further price gains.

Supply from producing regions has remained constrained by still stringent overproduction checks regionally in Shanxi and Inner Mongolia, encouraging miners to largely maintain offers firm. 

This partly contributed to sustained losses in transferring cargoes to northern ports, which has discouraged aggressive selling at ports, allowing traders to keep offers broadly unchanged despite increasingly sluggish trading.

Offers for 5,500 Kcal/kg NAR coal at northern ports were mostly heard around 830-835 yuan/t, FOB with VAT, while buying indications slipped below 830 yuan/t. Cargoes of low-sulfur 5,000 Kcal/kg NAR coal were quoted near 740 yuan/t, yet a counteroffer to 0.6%-sulfur same-CV grade was heard under 730 yuan/t.

Another trader reported deals for 4,500 Kcal/kg NAR coal at 640-645 yuan/t, delivered to designated areas at northern ports.

"With inventories this large and demand so weak, prices could correct, perhaps not much in July, but if destocking fails in August, we'll see further declines that will force miners to cut production-area prices," said a northern China-based trader source.

Sxcoal's data showed that the combined stocks at four major Bohai-rim ports (Qinhuangdao, Caofeidian, Jingtang, and Huanghua) totaled 30.35 million tonnes as of early July 22, up 7.08% week on week and exceeding the year-ago level by nearly 12%.

The tonnage-adjusted stock-to-fleet ratio, a key gauge of visible port supply, ascended to 0.70 on the same day, well above the six-month rolling 80th percentiles, Sxcoal's assessment showed, indicating a loosening supply environment that leaves price rally unsustainable.

Another source in northern China reported that truck-delivered blended 5,000 Kcal/kg NAR coal with 1% sulfur was being offered at index minus 5-8 yuan/t, but his firm remained reluctant to take given the high inventory levels. Market sentiment is actually quite poor, and cargoes are moving very slowly, he pointed out, preferring to stay on the sidelines for now.

"I think people are worried about an index correction and want to offload a bit early. We'll likely wait until month-end for any essential restocking and see if prices will come down," he said.

Several traders also reported that more cargoes had returned to the market, as concerns grew that benchmark indices could soften, prompting some participants to accelerate sales before prices weakened.

End-user demand showed limited improvement, with power plants largely maintaining soft appetite for spot cargoes amid ample supply of long-term contracted supplies.

Coal burns at a group of inland power plants, which heavily rely on domestic resources, retreated by nearly 2.5% week on week to 3.43 million tonnes as of July 20, though rebounding by over 18% month on month, remained 3% lower than the year-ago level. The inventory could cover nearly 24 days' worth of usage, only down 1.1 days year on year.

Participants widely agree that sustained price gains face significant headwinds. The combination of record-high port stocks, comfortable utility inventory positions, modest demand recovery and intensified safety oversight in key production regions suggests the market is likely to remain rangebound with a softening bias in the near term.

The pace of inventory drawdowns at both northern and southern ports, together with the trajectory of summer peak demand, will be the key variables to watch in determining whether cost support can hold or inventory pressure eventually forces a broader correction.

On July 22, the CCI Index for 5,500 Kcal/kg NAR coal stood unchanged on the day at 827 yuan/t FOB with VAT; the index for 5,000 Kcal/kg NAR coal was 736 yuan/t and 4,500 Kcal/kg NAR grade 640 yuan/t, both standing still.