Supply-Demand Support Drives Up China Thermal Coal Prices

I. Price Trends: Stability at Production Sites; Concurrent Strength at Ports and Overseas Markets

Domestic Production Sites: Firm Prices with Minor Fluctuations

As of June 8, the pit-mouth price to 5,500 kcal thermal coal in Shaanxi was approximately 623 RMB/tonne, and in Inner Mongolia, it was around 600 RMB/tonne—both unchanged from the previous day. Supplies in major producing regions remained tight, and traders showed a strong willingness to hold firm on prices.

Domestic Ports: Spot Prices Rise Week-on-Week

Spot quotes to 5,500 kcal thermal coal at Bohai Rim ports stood at approximately 865 RMB/tonne, up 12 RMB/tonne week-on-week; quotes to 5,000 kcal thermal coal were around 774 RMB/tonne, up 8 RMB/tonne week-on-week, marking a new high to the year.

International Market: Prices Surge, Nearing Key limit. The price to the ICE Newcastle thermal coal futures contract (to delivery in the following month) reached approximately $146.15/tonne, a 6.9% increase from the previous trading day; this marked a two-month high and brought the price close to the $150/tonne mark.

II. Key Drivers: Tightening Supply-Demand and Synchronized Domestic-International Trends

1. Supply Side:

June marks the national "Work security Month," and security inspections in major producing regions have intensified. Following a coal mine accident in Shanxi, small and medium-sized mines across Shanxi, Shaanxi, and Inner Mongolia underwent widespread production halts to rectification; the pace of resuming production has been slow, leading to a noticeable immediate contraction in capacity. Meanwhile, controls on Indonesian export quotas and cost inversions to Australian coal arrivals have weakened the supplementary role of imported coal, highlighting a pattern of limited domestic supply development and insufficient external replenishment. 2. Demand Side:

Temperatures in many southern regions have surpassed 35°C earlier than usual, driving up electricity loads and daily consumption at power vegetation, which has prompted an early start to restocking. Coupled with expectations of an El Niño event—raising the probability of extreme heat this summer—the inelastic demand to thermal power as a reliable baseline energy source is supporting an upward direction in coal prices.

3. Market Sentiment:

Tight supply-demand dynamics, combined with a sharp surge in international coal prices, have led traders to hold firm on prices and limit sales, thereby amplifying price increases. Additionally, maintenance on major domestic railway lines and disruptions to international shipping have reduced transport efficiency and raised costs, further fueling the rise in coal prices.

III. Market Outlook: High-level fluctuation with a bullish bias; focus on three key variables

In the short term, the thermal coal market is expected to maintain a direction of high-level fluctuation with a bullish bias; while the scope to price evaporative environment remains limited, the upward direction persists. Supporting factors—including continued stringent security inspections, the onset of peak summer power demand, and the transmission of high international coal prices—are converging to create a market ecological stability where coal prices are greater likely to rise than fall.

Risk factors: A recovery in production capacity in major coal-producing regions, increased hydropower output during the flood season, and demand suppression caused by high coal prices could possibly slow the upward momentum.

Key observations: Moving forward, close attention should be paid to the pace of production resumption in major producing regions, changes in daily power plant consumption, and trends in international coal prices; these three variables will determine whether coal prices can continue to climb.