I. Key Summary of the Week

Last week (July 13–20), the thermal coal market exhibited a divergent pattern: strong performance at production sites, a stalemate at ports, a slow recovery in demand, and sluggish import trading. Over thirty coal mines across the major production regions of Shaanxi, Inner Mongolia, and Shanxi raised prices for washed and processed coal; essential demand from the chemical and coking sectors bolstered the strength of washed lump coal. Prices at Bohai Rim ports edged up, though high inventory levels suppressed trading volume amidst an intensifying tug-of-war between bullish and bearish sentiments. High temperatures during the "Sanfu" (hottest period of summer) drove a continued rise in daily coal consumption at coastal power plants, signaling improved end-user demand; however, with power plants holding ample reserves, large-scale restocking has yet to begin. Geopolitical conflicts in the Middle East boosted international energy sentiment and shipping rates, keeping overseas quotes for imported coal firm, even as domestic purchasing remained weak. Overall, coal prices fluctuated within a range: tight supply at production sites provided a floor, while high inventories at ports and power plants capped the upside, making a sharp, one-sided rally unlikely in the short term.

II. Supply Side: Price Hikes Outnumber Drops at Production Sites; Washed Coal Leads Gains; Raw Coal Trends Diverge

Last week, numerous coal mines across major production areas—including Ordos, Northern Shaanxi, and Shanxi—adjusted their ex-factory prices. Price increases outnumbered decreases, highlighting a distinct divergence in market trends.

1. Washed Coal Strengthens, Supported by Essential Demand

Mines such as Huineng Anyuan West, Zhongneng Yi'an, Mataihao, Yidong, and Huibao generally raised prices for washed fines, granules, and lump coal by 5–15 RMB/tonne, with mainstream quotes for washed lump coal stabilizing in the 720–770 RMB/tonne range. With the chemical and coking industries continuing to stock up, essential non-power demand bolstered the market for washed coal; consequently, the number of trucks arriving at mine loading platforms increased, on-site inventories continued to decline, and mines showed a strong determination to maintain higher prices. 2. Slight weakening in raw coal and blended coal prices

Mines such as Huineng Changtan, Gonggou, and Erlintu have lowered prices for raw coal and medium-sized blended coal by 8–10 RMB per tonne. The raw coal market faces constraints due to a slowdown in the pace of downstream power plants picking up coal at the mines and ample supplies of long-term contract coal, resulting in limited procurement of market-priced coal. Coal slime prices are fluctuating in both directions, with procurement for blending based on demand rather than a unified trend.

3. Geopolitical factors boost market sentiment

Iran’s retaliatory stance against the US and the US issuance of a global security alert have heightened geopolitical tensions in the Middle East, fueling bullish sentiment for international energy and providing marginal support for domestic coal prices. Coupled with tight coal supplies in Shanxi and inverted railway shipping economics (where costs exceed market prices), the potential for price declines at the source has been effectively capped.

III. Port Sector: Prices edge up, inventories continue to accumulate, and trading stalls

Since the current round of price increases began on July 13, the price of 5,500 kcal thermal coal at ports has risen by a cumulative 16–20 RMB, with the CCI 5,500 kcal index quoted at 821 RMB/tonne. However, the rise in market quotes has not translated into a recovery in actual trading volume, leaving the market in a dilemma.

1. Inventory pressure continues to mount

Total inventory at northern ports has risen to 30.768 million tonnes, with a single-day increase of 760,000 tonnes, while only 150 vessels are waiting at anchor. The pattern of "high inventory and low vessel arrivals" is unlikely to improve quickly; high inventory levels directly limit traders' ability to raise prices, and downstream buyers remain in a "wait-and-see" mode. With only sporadic tenders from end-users, spot market trading remains sluggish.

2. Offsetting bullish and bearish factors lead to narrowed price fluctuations

Bullish factors: Tight coal supplies in major producing areas (Shanxi) and inverted railway shipping costs result in high arrival costs at ports, reducing traders' willingness to sell at low prices; electricity demand loads continue to rise during the peak summer heat (*Sanfu* period), maintaining expectations for a strong peak season.

Bearish factors: Continued accumulation of port inventories, slow restocking by power plants, and disruptions to coastal electricity consumption caused by typhoons; no market rush to secure supplies has materialized.

Overall, port prices have entered a phase of oscillation and consolidation, making significant short-term fluctuations unlikely. IV. Demand Side: Daily consumption at power plants rises steadily; ample inventories limit the intensity of restocking

This week marked the start of the "Sanfu" (hottest period of summer), with high temperatures spreading across the country and electricity demand showing marginal improvement. However, due to sufficient inventory buffers at the terminal level, procurement remains cautious and limited to essential needs.

1. Data for the six major coastal power plants continues to improve

As of July 16, the six major coastal power plants held 14.599 million tonnes of inventory, with daily consumption at 861,000 tonnes and 16.9 days of usable coal supply. Daily consumption rose by 5.68% week-on-week and 11.34% month-on-month; high temperatures are driving a steady increase in coal consumption, signaling a clear recovery in demand. Market consensus suggests that once the typhoon passes, daily consumption at power plants could approach the 900,000-tonne mark, potentially triggering a wave of concentrated restocking.

2. Procurement strategy focuses on inventory drawdown

Power plants had previously built up inventories, and long-term contract coal supplies were fully guaranteed; consequently, market-traded coal was purchased only through small, need-based tenders, with no large-scale, concentrated buying. In non-power sectors, demand remained stable only for chemicals and coking, while demand from the cement and building materials industries remained sluggish, failing to generate significant incremental demand.

V. Imported Coal: Firm overseas prices; slow correction of the domestic price inversion; insufficient transaction follow-through

Competition between international and domestic import coal markets intensified this week. Rising shipping rates supported overseas prices, but domestic terminal procurement interest remained low, resulting in weak trading activity.

1. FOB quotes for low-calorific Indonesian coal rise

FOB quotes for Indonesian Q3800 kcal coal (Panamax vessel) rose to $64–65 per tonne. Overseas coal suppliers collectively held firm on prices, driven by the recovery in the domestic coal market and rising dry bulk shipping rates (spurred by geopolitical tensions in the Middle East). However, high inventory levels at domestic power plants dampened procurement enthusiasm, leading to sluggish transaction follow-through. 2. Strong demand for Russian coal; market divergence

The quote for Russian Q5500 coal (ex-barge, Yangtze River) stands at 860 RMB/tonne; downstream industrial buyers continue to procure based on essential needs, while some traders, bullish on the future outlook, are proactively locking in supplies. The South China imported coal index has shifted from rising to falling, and the price inversion between domestic and imported coal is slowly correcting; in the short term, imported coal is unlikely to divert significant demand away from the domestic market.

3. Conditions for a rally in imported coal prices

Market consensus: Imported coal prices will only gain momentum for a new round of increases if power plants maintain high daily consumption levels for over 10 days and there is a substantial reduction in inventories at both ports and power plants.

VI. Market Outlook for Next Week

1. Supply side: Safety inspections at production sites have become normalized, and non-power sector demand for washed coal continues to provide support. Pit-mouth prices are fluctuating with a firm bias; raw coal prices are fluctuating slightly in line with power plant restocking paces, with an overall trend of more gains than losses.

2. Port side: High inventory levels remain the primary constraint, with prices mainly fluctuating within a range; the FOB price for 5500 kcal coal is expected to trade between 810 and 835 RMB/tonne. If power plant daily consumption exceeds 900,000 tonnes following the typhoon, ports may see a temporary reduction in inventory and a slight pickup in trading activity.

3. Demand side: High temperatures during the "Sanfu" (hottest summer) period persist, and power plant daily consumption continues to trend upward. As initial inventories are depleted to safety thresholds, terminal restocking demand will gradually be released, becoming the core driver of coal prices in the later period.

4. Risk factors

Bullish factors: Escalating geopolitical conflicts in the Middle East, prolonged extreme heat, and tightened safety inspections in major production areas. Bearish factors: Continued accumulation of port inventories, reduced electricity load due to rainfall and cooling temperatures, and a surge of imported coal arrivals impacting coastal markets.

Overall, thermal coal prices next week are expected to maintain a fluctuating pattern—supported at the bottom but facing pressure at the top. A market turning point will depend on significant inventory reduction at ports and power plants, alongside the materialization of concentrated restocking by end-users.

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