China's domestic thermal coal market has rebounded noticeably since last Friday, with prices at both mine-mouth and port markets stabilizing and moving higher. As of July 14, the CCTD-Spot Index for 5,500 kcal/kg, 5,000 kcal/kg and 4,500 kcal/kg thermal coal stood at RMB 804/t, RMB 713/t and RMB 622/t, up RMB 3/t, RMB 4/t and RMB 6/t, respectively, from the previous trading day.
The recent recovery has been driven by relatively tight spot supply in the upstream market, expectations of stronger seasonal power demand during the summer peak, and renewed geopolitical tensions in the Middle East. Together, these factors have helped ease the previously bearish sentiment, encouraged sellers to raise offers, and supported a short-term rebound in coal prices.
Supply Remains Relatively Tight
On the supply side, production in major coal-producing regions has remained constrained. Frequent rainfall has disrupted operations at some mines, while stringent safety inspections have continued to limit production. According to latest CCTD monitoring, capacity utilization at sampled mines in Shanxi, Shaanxi and Inner Mongolia is currently around 78.7%, below 80.2% recorded during the same period last year.
At the port level, the market has underperformed the mine-mouth market throughout the recent price decline. Widening losses on rail-to-port shipments have discouraged cargo deliveries, while sluggish outbound shipments and temporary weather disruptions have further reduced inflows. Since the beginning of July, daily coal shipments on the Daqin Railway fell from around 1.2 Mt to 0.665 Mt, while inventories at major northern ports declined from 29.01 Mt to 28.21 Mt, resulting in fewer spot cargoes available in the market.
Seasonal Demand Expectations Continue to Improve
Expectations for summer electricity demand have also strengthened. As the rainy season gradually ends across southern China and the hottest period of summer approaches, residential air-conditioning use and industrial cooling demand are expected to rise further. Market participants generally expect thermal coal consumption at power plants to accelerate in the second half of July, allowing utility inventories to gradually decline and providing additional support for coal prices.
Meanwhile, persistent losses on rail-to-port shipments have reduced traders' willingness to move cargoes, making replacement purchases more difficult. Combined with expectations of stronger seasonal demand and firmer international energy prices, sellers have become increasingly reluctant to cut prices. Truck queues at mine-mouth loading points have lengthened, while port quotations have continued to edge higher.
Risks to a Sustained Rally Remain
Despite the recent improvement in sentiment, it is still too early to conclude that the market has entered a sustained upward trend, as several downside risks remain.
First, supply remains more resilient than recent data may suggest. The sharp decline in Daqin Railway shipments was largely caused by localized heavy rainfall rather than a genuine shortage of coal supply. Following the improvement in weather conditions, daily shipments have already recovered to around 1.2 Mt. In addition, rainfall across China's major producing regions has generally been lighter than during the same period last year. If the impact of safety inspections gradually eases, coal production could recover further, increasing market supply.
Second, the anticipated demand recovery has yet to be fully confirmed. Although expectations for peak summer electricity consumption remain supportive, the western Pacific subtropical high has continued to be disrupted by cold vortices and typhoon activity. Persistent high temperatures in southern China may not arrive until late July, and current weather forecasts provide little evidence of an exceptionally hot summer nationwide. Temperatures across most regions remain below seasonal averages. At the same time, coal inventories at power plants remain historically high, allowing utilities to maintain a cautious procurement strategy and continue pressing for lower prices.
In addition, although seaborne coal prices have received some support from higher import costs and increased buying inquiries, port congestion persists and international supply has not tightened materially. As a result, meaningful gains in international coal prices may also face resistance.
Outlook
Overall, relatively tight domestic supply, improving expectations for peak-season demand and recovering market sentiment should continue to support a near-term recovery in thermal coal prices, with the 5,500 kcal/kg benchmark holding above RMB 800/t for now. However, if high temperatures and power-sector coal consumption fail to strengthen as expected, while domestic supply gradually recovers and inventories across the supply chain decline more slowly than anticipated, the durability of the current rally will remain uncertain.
褰檽锟斤拷?