Multiple Factors Weigh on Thermal Coal Rally

Since last week, sentiment in China’s thermal coal spot market has turned more cautious. Trading activity has slowed, and prices have stabilized after the previous rally. As of May 18, the CCTD spot index stood at RMB 834/mt for 5500 kcal/kg coal, RMB 747/mt for 5000 kcal/kg coal, and RMB 653/mt for 4500 kcal/kg coal, all unchanged from the previous period.

1. Imported coal prices soften

Imported coal prices have started to weaken, particularly for low-calorific-value cargoes. According to the China Imported Thermal Coal Purchase Price Index released on May 15, the CFR South China price for 3,800 kcal/kg coal fell by RMB 13/mt to RMB 592/mt. The decline has improved the cost competitiveness of imports and limited further upside for domestic coal.

2. Port inventories rise and trader selling increases

After maintenance on the Daqin railway line, inventories at Bohai Rim ports have continued to build. Qinhuangdao Port stocks have reached around 6.1 million tonnes as of May 18, according to CCTD data. Rising inventories and earlier profit-taking after the price rally have encouraged traders to increase sales, adding pressure to the market.

3. Weak downstream spot demand

Coal consumption at coastal utilities remains slightly above last year but still within the seasonal shoulder period. Stable long-term contract supply has reduced urgency for spot procurement, especially at high prices. Meanwhile, rising operational pressure at coal-fired power plants has further weakened their ability to absorb expensive spot cargoes.

4. Expectations of improving domestic supply

Domestic supply tightness has been a key support for prices this year. China produced 1.58 billion tonnes of raw coal in January–April, down 0.1% year on year. However, with peak summer approaching, supply security has become a policy priority. Recent meetings in major producing regions such as Shaanxi and Inner Mongolia have reinforced expectations of improved supply in the coming months.

Outlook

Overall, these factors have weakened upward momentum in the thermal coal market, leading to a consolidation phase in prices. However, relatively low downstream inventories compared with last year and persistently high oil and gas prices still provide underlying support. As temperatures rise and seasonal demand strengthens, market sentiment may recover in the coming weeks.