Seasonal Demand Weakness Continues to Outweigh Supply Support

Market Overview: Supply Constraints Offset by Weak Demand
China's thermal coal market remained range-bound in late June as supply-side support was largely offset by persistently weak demand. Ongoing nationwide safety inspections and stricter production controls in the major mining regions of Shanxi, Shaanxi, and Inner Mongolia continued to limit domestic supply, providing a floor for mine-mouth prices.
However, demand remained subdued. The rainy season in southern China boosted hydropower generation and displaced coal-fired electricity, while coastal utilities maintained high inventories and relied primarily on long-term contracts. At the same time, lower-priced imported coal continued to capture market share, weighing on domestic spot demand. Overall, the market lacked meaningful upward momentum and is likely to remain weak until the rainy season ends and summer power demand strengthens.

Supply: Tight Safety Controls Continue to Support Mine Prices
Safety inspections remained intensive across the main producing regions, with frequent mine inspections and stricter compliance requirements prompting many small and medium-sized mines to reduce output. Some mines also entered scheduled maintenance toward month-end, further tightening near-term supply.
Meanwhile, falling international coal prices and lower freight rates reduced the cost of imported Indonesian and Australian coal. Cargoes booked earlier continued to arrive at southern ports, where lower-calorific imported coal maintained a price advantage and continued to displace domestic coal purchases.

Demand: Seasonal Weakness Persists
Persistent rainfall across the Yangtze River basin lifted hydropower output, reducing thermal power generation. Coal consumption at coastal power plants remained below peak-season levels, while inventories stayed elevated, limiting spot procurement.
Non-power sectors, including cement and coal chemicals, continued to purchase only on a need-to basis. Weak buying interest, widening bid-offer spreads, and increasing cargo sell-offs kept spot transactions thin, with some smaller mines cutting prices to ease inventory pressure.

Price Trends
Mine-mouth market: Supported by safety inspections and scheduled production suspensions, price declines are expected to slow to around RMB 10–15/mt. State-owned mines remain relatively stable under long-term supply contracts, while some private mines continue to offer modest discounts to stimulate sales.
Port market: Prices at Bohai ports remain under pressure. 5,500 kcal/kg NAR low-sulfur coal is trading around RMB 860–865/mt FOB, but continued arrivals of imported coal and weak end-user demand could push prices down by a further around RMB 20/mt in the near term.

Outlook
Supply will remain constrained in the short term as safety inspections, production caps, and month-end maintenance continue to restrict output. Nevertheless, weak seasonal demand, high utility inventories, and competitive imported coal are expected to keep the market under pressure. Mine-mouth prices are likely to stabilize with only limited downside, while port prices may continue to soften due to oversupply and sluggish spot trading.

Looking further ahead, the market outlook could improve in the second half of July. Forecasts of widespread summer heat are expected to lift electricity demand to seasonal highs. As the rainy season ends, hydropower output is likely to decline, increasing reliance on coal-fired generation and prompting utilities to replenish inventories. With domestic supply still constrained by safety measures and production controls, and imported coal potentially becoming less competitive if price spreads narrow, the supply-demand balance could gradually tighten, providing room for a recovery in coal prices.