Thermal coal surges 47% YTD to near 1,000 yuan; analyst says breaking 1,000 not hard once restocking demand emerges

By Li Jiajia, China Times (Beijing)

Entering September, domestic thermal coal prices have reached 987 yuan per ton, up 85 yuan per ton from the beginning of the month, highlighting a notable price surge during the traditional off-season. Notably, the commodity touched 1,002 yuan per ton on September 9 and 10. Compared to the price of 682 yuan per ton at the start of the year, the cumulative increase stands at nearly 47%.

Can coal prices once again hold firm above the 1,000-yuan mark? Zeng Xiang, a thermal coal analyst at First Futures, told China Times that the price of 5,500 kcal coal is hovering near the 1,000-yuan threshold. "Currently, the off-season lacks demand. As long as restocking demand is released, it will not be difficult to climb back above the 1,000-yuan mark," he said.

Low Production Levels

Inventory data further confirms the tightening trend. Coal stockpiles at major Bohai Rim ports have continued to decline, reducing the volume of market-available supply.

"The domestic supply-demand balance has been relatively tight recently, pushing coal prices higher," said Ren Huiyun, a coal analyst at Zhuochuang Information. She added that safety inspections in major production areas remain stringent, and the resumption of production at some mines in regions such as Shanxi has fallen short of expectations. Coal output in key production areas has limited room to expand, port inventories remain at low-to-moderate levels, and transportation costs continue to be inverted. At the same time, drought conditions in Indonesia and delays in export quota approvals have constrained import growth, further supporting domestic coal prices.

Insufficient import supply is a key supporting factor for the strength of domestic coal prices. According to customs data, China imported 42.09 million tons of coal in August, down 1.5% year-on-year, a significant slowdown from the 20.3% growth rate recorded in July. The pressure on the import market stems from multiple factors, including slow progress in Indonesia's RKAB quota approvals and drought affecting river transport. Additionally, occasional price inversions between imported and domestic coal have disrupted imports. Based on high-frequency data for September, the volume of imported coal arrivals is likely to continue declining month-on-month, further weakening its role in supplementing the coastal market.

In addition, persistently high pithead coal prices have raised procurement costs for traders. Combined with expectations of concentrated pre-holiday restocking by enterprises and the upcoming autumn maintenance of the Daqin Railway, traders have a strong willingness to hold prices firm. These multiple factors have jointly driven the upward shift in thermal coal prices.

Pressure on Thermal Power Enterprises

Commenting on the current market landscape, Zeng Xiang noted that the coal market is currently in a period of weak supply and weak demand. Supply remains low due to slow production recovery, while demand has also weakened amid a decline in total power generation and the expansion of new energy sources.

"The rise in coal prices primarily increases costs for downstream users. Currently, downstream buyers are resistant to high prices and have slowed procurement, waiting for the release of additional supply from guaranteed production capacity. Pre-holiday restocking demand is subdued," Zeng said.

Ren Huiyun echoed this view, stating, "Downstream users in coastal regions have limited acceptance of high-priced market coal. Their purchasing sentiment is cautious, with some buyers bargaining for lower prices. Restocking is mainly focused on fulfilling long-term contracts."

The thermal power sector faced overall pressure in the first half of 2026, primarily due to declining electricity prices. Rising coal prices have also been an important factor squeezing industry profits.

Financial data shows that in the first half of the year, major thermal power companies such as Huaneng Power International and Huadian Power International both saw declines in revenue and net profit. Huadian Power International reported a net profit attributable to shareholders of 3.105 billion yuan, down 20.47% year-on-year. Guodian Power also recorded weaker results.

Divergent Trends Possible

Industry insiders believe that the thermal coal market in October will require close attention to the effectiveness of supply guarantee policies. On the policy front, in early September, the National Development and Reform Commission's Operations Bureau held a special meeting to coordinate coal transportation from Xinjiang, emphasizing the need to stabilize Xinjiang's coal output, strengthen transport capacity, and increase outbound volumes. In mid-September, the National Development and Reform Commission, the National Energy Administration, and the National Mine Safety Administration jointly issued a notice on ensuring safe and stable coal production and supply, outlining measures to promote the resumption of production at suspended mines, ensure compliant production capacity expansion within the year, release coal production reserves as needed, and strengthen the signing and performance of medium- and long-term coal supply contracts for power generation. Under this policy push, expectations of improved supply have clearly risen.

Another factor to watch is terminal consumption performance. For coal used in power generation, October is an off-season, and power plant inventories are expected to rise passively. With long-term contracts in place, procurement from the spot market is likely to remain limited. For non-power sectors, although October is traditionally a peak season, the fundamentals of infrastructure and real estate remain weak, limiting demand from cement and other industries.

Regarding the specific trajectory of coal prices in October, Ren Huiyun predicted that the market would mainly experience high-level volatility, with a possible pattern of strength early in the month followed by weakness. The autumn maintenance of the Daqin Railway in October will limit the volume of coal shipped to ports, while some downstream buyers will begin winter stockpiling, which is expected to support prices. However, as winter stockpiling winds down and downstream resistance to high prices persists, the implementation of supply guarantee measures may lead to improved domestic production. As a result, the momentum for further price increases is likely to weaken, and a pullback is possible.

Zeng Xiang, on the other hand, believes that October will bring greater market uncertainty. "Production is still recovering, and although the pace may accelerate, overall output has not yet fully recovered. Based on current conditions, downstream restocking efforts are likely to intensify, and prices are more likely to remain strong," he said.

(Source: China Times)