Although expectations for peak summer demand remain intact, market optimism in the thermal coal sector has begun to fade amid a notable buildup in end-user inventories, persistently weak spot demand, and easing geopolitical tensions.
Port Market
Frequent rainfall across China's coastal regions has continued to weigh on coal consumption, resulting in insufficient demand support. With long-term contract deliveries and imported coal supplies being steadily fulfilled, end-users have been able to continuously replenish inventories, leading to persistently weak interest in spot purchases.
On the supply side, many sellers remain optimistic about future market prospects and are supported by relatively high portside delivery costs, prompting them to hold offers firm and wait for clearer market signals. However, as sales continue to be weak, some suppliers have gradually lowered their prices.
As of June 23, the CCTD-Spot Index for 5,500 K, 5,000 K, and 4,500 K coal stood at RMB 863/mt, RMB 774/mt, and RMB 675/mt, respectively, unchanged from the previous week.
Production Areas
Strict mine safety inspections remain in place, continuing to constrain market supply. However, following the sharp price increases seen earlier, trading risks have also risen significantly. Coupled with an increasing number of failed pithead auctions, risk-averse sentiment among buyers has strengthened, leading to a decline in purchasing enthusiasm.
Since the Dragon Boat Festival holiday, sales at many coal mines have cooled noticeably, and price cuts aimed at stimulating demand have become increasingly common.
As of June 22, pithead prices were around RMB 685/mt for Northern Shanxi 5,500 K coal, RMB 695/mt for Yulin 5,800 K coal, and RMB 630/mt for Ordos 5,500 K coal, representing week-on-week changes of 0, 0, and -5 yuan/mt, respectively.
Market Outlook for Late June
The thermal coal market is likely to face increasing pressure in late June due to the following factors:
1. Rainfall Continues to Suppress Demand
According to weather forecasts, persistent rainfall is expected to continue across much of China in the near term. As a result, national temperatures are likely to remain below normal levels, limiting power generation demand and keeping thermal coal consumption below expectations. Demand support from power-sector coal burn is therefore expected to remain weak.
2. Elevated Inventories Across the Supply Chain
According to CCTD monitoring data, coal inventories at major Bohai-Rim ports currently stand at 28.22 million tonnes, broadly unchanged from the same period last year and remaining at a relatively high level.
On the downstream side, thermal coal inventories held by CCTD's coastal end-user sample are also elevated, standing 6.7% higher than a year earlier.
3. Fundamental Support Expectations Are Weakening
While mine safety inspections will remain stringent during the Safety Production Month campaign, improving safety conditions and intensified efforts to ensure fuel supply during the summer peak season are expected to support a recovery in domestic coal production in the coming months.
Meanwhile, as tensions in the Middle East ease, oil and natural gas prices are likely to continue retreating. This could weaken both the fuel-switching demand support for coal and the geopolitical premium embedded in coal prices.
Conclusion
Overall, frequent rainfall, elevated inventories across midstream and downstream sectors, and easing geopolitical tensions are likely to leave the thermal coal market facing both weak spot demand and deteriorating demand expectations in late June. As a result, downward pressure on coal prices is expected to increase.
Market participants should closely monitor changes in coal supply from production regions and inventory movements across downstream sectors toward the end of the month.
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