China’s thermal coal market continued to rise last week, although gains slowed toward the weekend. At ports, all CCTD-Spot indices stabilized on Friday. Downstream buying interest has weakened following recent mine-mouth price increases, but most mines continue to raise prices, with no clear downward trend in the overall market.
Port Inventories Continue to Decline, Supporting Prices
Port inventories fell by more than 1 Mt last week. Lower key railway freight rates improved traders’ shipping incentives, lifting average daily port inflows to 1.635 Mt, up 0.5% week on week. However, typhoon disruptions reduced average daily outflows to 1.753 Mt, down 3.8%.
Although lower freight rates should support higher arrivals, margins for delivering coal to ports have not improved significantly. Production in major mining areas also remains constrained by safety controls, keeping procurement costs elevated. Port inflows may recover gradually, but the increase is likely to remain limited, allowing inventories to continue declining and supporting prices.
High Coal Burn Drives Further Inventory Drawdowns
Typhoon-related heavy rainfall reduced coal consumption in parts of eastern China, including Shandong and Jiangsu, but coal deliveries also declined. Meanwhile, the return of high temperatures in southern China boosted power plant coal burn in Guangdong and other areas.
From Aug. 7-13, average daily coal consumption at power plants across the eight coastal provinces reached 2.368 Mt, up 1.2% week on week and the highest level this summer. Inventories fell by 1.278 Mt, or 3.5%, leaving stocks just 1.6% above the same period last year.
Safety Controls Remain a Key Constraint on Mine Supply
CCTD data showed that the capacity utilization rate of 442 monitored coal mines stood at 79.1% from Aug. 3-9, up just 0.4 percentage points week on week, indicating a limited recovery in production.
Meanwhile, coal mine accidents have resurfaced. A gas outburst at a coal mine in Hunan reportedly left seven people missing, while an accident in Zichang, Shaanxi, resulted in one fatality. Shaanxi subsequently held an emergency coal mine safety meeting, while Ningxia convened a meeting on mining safety issues.
Although the immediate impact of safety inspections on output is expected to remain limited, renewed accidents and tighter oversight will continue to constrain capacity releases. Mine supply is unlikely to recover rapidly, while elevated production costs should continue to support port prices.
Cautious Buying Leaves Market Coal Structurally Tight
Power plants remain reluctant to accept high-priced coal and continue to rely mainly on long-term contract supplies, with no significant end-user shortage.
However, inventory structure at ports is increasingly important. Stocks at Caofeidian and Jingtang, where market coal accounts for a relatively large share, have declined more rapidly. Some cargoes have also been locked in by downstream buyers, leaving limited freely tradable market coal.
Thus, while total port inventories remain relatively high, spot availability is tightening. A temporary pickup in downstream demand could therefore quickly push port prices higher.
Weather Disruptions Ease, but Demand Should Remain Relatively High
Weather disruptions to coal production have been less severe than expected, with rainfall in major mining areas remaining limited. As the main rainfall belt moves south, coal consumption in southern China could face some pressure, while temperatures in eastern and northern China are recovering.
Overall, coal demand is unlikely to accelerate sharply but should remain relatively high, supporting continued inventory drawdowns at power plants and ports.
Imported Coal Remains Competitive
According to CCTD estimates, the delivered cost of 3,800 kcal/kg imported coal to southern China was around RMB 588/t on a Panamax basis, about RMB 43/t below comparable domestic coal. Australian 5,500 kcal/kg coal was around RMB 890/t on a Capesize basis, about RMB 25/t below domestic coal. As the domestic rally slows, the import price advantage is likely to narrow.
Prices Likely to Hold Firm, with Further Upside by Month-End
Overall, the market remains characterized by tight supply, relatively high demand and cautious spot procurement. Tighter safety oversight, elevated mine-mouth costs and shrinking freely tradable port coal continue to support prices, while high coastal coal burn and declining inventories provide additional support.
However, ample long-term contract supplies and cautious utility buying are limiting the pace of gains. Port prices are therefore likely to remain firm this week, with a modest increase possible toward the weekend. If hot weather returns and keeps coal burn elevated, further tightening of freely tradable port coal could provide additional upside momentum. Another round of domestic thermal coal price increases toward the end of August remains likely.
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