China's domestic thermal coal market at northern transfer ports is heading towards a holding pattern this week, with gains capped by tepid end-user demand even as tightening import supplies provided a floor under prices. The post-holiday demand pulse gradually faded, leaving a market caught between sellers cashing in on winter inventory profits and buyers resisting lofty price levels.

Major Bohai-rim ports saw increased offers as a few trading houses are looking to lock in profits before the traditional low-Spring demand sets in. Offers for 5,000 Kcal/kg NAR coal (0.6% sulfur) were heard at 675-680 yuan/t FOB with VAT northern ports, though buying interest remained scarce.

"Most year-end inventory holders are already in profit and eager to sell, but demand is soft and sellers are competing for the limited orders," said a Zhejiang-based trader source.

"Now is the time to sell, rather than wait for the demand lull to set in," noted a Shanxi-based producer who planned to deliver two cargoes to term customers this week. "But I don't see a downtrend coming soon, as import prices are still too strong."

This sentiment was echoed across the trading community, with multiple sources reporting that fresh inquiries have slowed to a trickle. End users, comfortable with current inventory levels, are only willing to transact at index-linked prices, typically flat to 2-3 yuan/t below weekly CCI indexes.

Data showed that coal consumption at inland power plants, which mainly rely on domestic supplies, rebounded by 29.7% on February 26 compared with the week-ago level, yet still 27.3% below the month-ago level and 10.8% lower year on year.

Their coal stocks could cover 26.5 days' worth of use on the same day, down from a peak of 36.3 days on February 21 yet five days longer than the year-ago level.

Despite the softening domestic tone, traders cautioned against a quick correction, citing persistent strength in the seaborne market, as Indonesian supply disruptions continue to place domestic coal at a significant discount.

Some participants are now watching port inventory as one of the key swing factors. A faster-than-expected build could tilt the balance toward buyers, while any sustained drawdown would reinforce the current floor.

Sxcoal's data showed that coal stocks at key Bohai-rim ports were relatively stable, around the 2021-2025 average on February 28, but the stock-to-fleet ratio, which assesses the tightness of port supply, fell below the 180-day rolling 20th percentile, suggesting a near-term supply strain.

On March 2, 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 rising 2 yuan/t compared with late last week. The index for 4,500 Kcal/kg NAR coal was unchanged at 581 yuan/t.

Import coal adds support

Sxcoal calculations on February 28 showed that the imported Indonesian 3,800 Kcal/kg NAR coal prices were roughly 14.8 yuan/t more expensive than China's domestic 4,500 Kcal/kg NAR coal on a CV-adjusted and delivered-to-South China basis, with the spread widening by over 5 yuan/t compared with a week earlier.

"The arbitrage window for Indonesian 3,800 kcal/kg NAR coal remains closed as import parity rises. With FOB offers near $62/t and Panamax freight at $7.5/t, landed prices in South China have climbed past 540 yuan/t (incl. VAT), significantly overshooting the 530 yuan/t ceiling currently set by domestic utilities," said a Guangzhou-based trader source. 

Some utility tenders in East China were reportedly failed due to a mismatch of prices between traders and power plants.

Australian high-CV cargoes looked equally challenging, with offers for 5,500 Kcal/kg NAR heard at $90-91/t FOB. Delivered costs would exceed 800 yuan/t, rendering these cargoes unattractive to Chinese buyers given the current competitiveness of domestic pricing.

Sxcoal's estimate showed that Australian 5,500 Kcal/kg NAR coal arriving in South China was priced 8.9 yuan/t higher than domestic same-CV coal delivered to the same southern ports.

Sxcoal observed that southern China, more reliant on Indonesian supplies, continued to see relatively resilient demand as utilities tried to cover shortfalls. Certain large utilities remained comparatively active in the import space.

In contrast, eastern China and the Yangtze River region have shown signs of fatigue. Rising river port inventories are adding to the cautious sentiment. "Port stocks are building, downstream inventories aren't low, meaning there's just no catalyst for another leg up," said a Zhejiang-based trader source.