China's domestic thermal coal market remained on a downward trajectory, as sustained muted purchases from traders and end users, alongside thick wait-and-see sentiment, compounded inventory pressure at ports and mines, prompting continued price pullbacks. Inquiries slightly rebounded late last week, potentially slowing the price decline or stabilizing prices, but remain insufficient for an uptrend.

Imported thermal coal prices also weakened further, albeit at a much slower rate compared with the domestic price decline. Utility inquiries picked up for low-CV grades after prices fell to a two-month-plus low, while a fast decline in freight rates also helped underpin seaborne coal's competitiveness.

Sxcoal CCI Index

On December 19, the CCI index for 5,500 Kcal/kg NAR domestic spot coal stood at 716 yuan/t FOB northern China port with VAT, falling 42 yuan/t week on week, while the CCI index for 5,000 Kcal/kg NAR domestic coal was also down by 42 yuan/t from a week earlier to 614 yuan/t, at the lowest levels since October 13 and October 9 respectively.

On the same day, the CCI 5500 Import index stood at $89.7/t, CFR southern China port, dipping $3.3/t compared with the previous week. The CCI 4700 Import index was down $1.7/t on the week to $72.5/t, while the CCI 3800 Import index dropped $1.3/t to $53.0/t.

Weekly Dynamics

Production areas saw prices further drop last week amid weak fundamentals, although the pace of declines slowed.

Supply slightly tightened over December 11-17, as a few mines suspended or scaled back output after completing annual production targets. Sxcoal's tracking data showed that the combined capacity utilization of the surveyed mines in Shanxi, Shaanxi, and Inner Mongolia dropped 1.49 percentage points from the previous week to 88.8%, and their output dropped 1.65% to 16.18 million tonnes.

Demand-side support remained weak. Continued decline in portside prices, coupled with a leading mining group's further cut of third-party coal buy prices, kept traders cautious in purchasing. Sales at most mines stayed sluggish, with inventories continuing to build.

Inventories at Sxcoal-surveyed 160 thermal coal mines stood at 4.19 million tonnes as of December 17, rising 0.89% compared with the preceding week and notching the highest level in over two months.

Facing selling pressure and growing inventories, some mines cut prices further. However, moderate restocking demand emerged from a few end users, allowing sales at several heavily discounted mines to improve marginally with prices edging up in isolated cases.

Sxcoal's tracking data showed that 59 out of the surveyed 160 thermal coal mines cut prices by 30.8 yuan/t during the same period, compared with 70 mines lowering prices by 33.7 yuan/t last week, while only one mine raised prices by 10 yuan/t, compared to one mine hiking prices by 3 yuan/t a week ago. The remaining 100 mines kept prices flat.

On December 19, Sxcoal assessed Yulin 5,800 Kcal/kg NAR thermal coal at 575 yuan/t, mine-mouth with VAT, slipping 37 yuan/t from the preceding week; Ordos 5,500 Kcal/kg NAR coal decreased by 13 yuan/t to 539 yuan/t; and Shanxi Datong 5,500 Kcal/kg NAR coal was assessed at 555 yuan/t, down 70 yuan/t week on week.

As year-end production cuts and shutdowns expand, miners' willingness to hold prices has strengthened, raising the possibility of short-term stabilization. However, whether prices can rebound later or not will still depend on a meaningful recovery in demand.

Coal deliveries through Daqin railway, a major transport artery connecting production areas to northern ports, dropped markedly by 10.6% week on week to 1.07 million tonnes during the week ended December 19. China Railway Hohhot Group, which supervises the rail networks in central and western Inner Mongolia, approved 24 trains to transport coal each day on average last week, adding 2 compared with a week earlier.

Portside market Spot prices at northern China ports remained under pressure, although the downside pace showed signs of easing approaching the week end.

Without a clear pickup in power load, power utilities' procurement was still dominated by long-term contract coal. Demand for spot coal stayed inactive, with only sporadic tenders and rigid demand driving liquidities, which offered little support to prices.

Some traders, bearish on the near-term outlook, bid aggressively at lower prices to cash out some stocks, pushing transaction prices further down.

However, a small increase in demand and slightly tighter supply from producing areas prompted some traders to resist low-price sales. This may help narrow losses or even stabilize prices in the short term. Overall upward momentum remained absent due to high port inventories and unimproved demand.

The combined inventories at Qinhuangdao, Jingtang, Caofeidian, and Huanghua ports accumulated further last week, although the pace slowed. The total stocks reached 29.65 million tonnes on December 19, climbing 14.87% from the month-ago level and 7.66% from the year prior, notching the highest since June 3, 2025, Sxcoal's data showed.

The tonnage-adjusted stock-to-fleet ratio, a major gauge for on-sight supply at ports, shifted to an uptrend following a short-lived correction, climbing by 0.16 to 0.89 on December 19, which exceeded the six-month rolling 80th percentile by 43.5%, according to Sxcoal's assessment, suggesting further loosened supply at northern ports.

The average coal burn at inland power plants, which are mainly fed by domestic supplies, remained flat week on week and 7.9% lower compared with the year-ago level on December 17, despite a monthly growth of 17.1% driven by seasonal temperature decline.

Hydropower generation stayed at a trough, yet its support to coal-fired power remained insignificant. Sxcoal's data showed that water outflow through the Three Gorges dam, a key indicator of China's hydropower generation, stood at 6,520 cu.m/s on December 19, inching up 0.9% from the week-ago level yet down 37.9% from the preceding month and 6.7% compared with the preceding year.

Import market also stayed weak last week amid the sustained domestic price decline. However, the low-CV grade saw increasing support from the cost side, prompting Chinese traders to bid more cautiously to utility tenders.

As Indonesia is about to impose coal export tariffs from 2026, which could raise the overall delivered costs to China, some traders shelved their plans to further lower prices and adopted a wait-and-see approach.

Offers from Indonesian miners remained relatively firm amid uncertain 2026 RKAB mining quotas. Indonesian 3,800 Kcal/kg NAR coal was heard offered at $47-48/t FOB for Panamax shipment, and sources reported increased difficulty in securing cargoes at $47/t.

Meanwhile, the continued price decline earlier, coupled with the recent sharp decline in seaborne freight rates, spurred some purchases from utilities and short-covering demand, which also contributed to the slowing price decline.

On December 19, Sxcoal assessed the utility tender-winning prices for 3,800 Kcal/kg NAR coal at 423 yuan/t CFR South China with VAT, falling 12 yuan/t compared with 435 yuan/t in the preceding week.

Coal consumption at coastal power plants, major consumers of seaborne imported coal, ascended only slightly by 2.8% week on week and 12% on the month. It was still 6.2% lower compared with the year-ago level, data showed, offering limited support to drive utility purchases.

As domestic prices dropped fast, imported low-CV coal registered a narrower price advantage. Sxcoal's calculation showed on December 19 that Indonesian 3,800 Kcal/kg NAR coal enjoyed a delivered-to-South China advantage of 29.34 yuan/t against domestic 4,500 Kcal/kg NAR coal on a CV-adjusted basis. That spread narrowed sharply by 22.99 yuan/t week on week and 46.08 yuan/t from the preceding month.

Australian high-CV coal continued to face muted demand, indicating prices still under downside risks. Offers of Australian 5,500 Kcal/kg NAR coal were around $75/t FOB.

Forecast

China's domestic thermal coal prices are likely to decline more slowly this week as demand picks up after some prices dropped below long-term contract levels. However, a rebound remains unlikely unless power plant consumption rises significantly or northern port inventories see a noticeable reduction. The import market for low-CV coal may stabilize due to cost support and cautious sentiment as Indonesia's export duty policy remains unclear. Meanwhile, high-CV coal continues to face downward pressure from weak utility demand.