MONTHLY: China's thermal coal market rallies sharply in May on summer restocking, supply concerns

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The rally unfolded in two distinct phases, beginning with an aggressive post-holiday restocking push - driven by El Nino event expectations and low utility inventories - followed by a late-month rebound triggered by safety inspection concerns after a fatal mining accident.

May surge begins in April

The month opened with a sharp upward trajectory immediately after the Labour Day holiday (May 1-5), Coastal utilities firms, having experienced April's earlier-than-usual heatwave, returned to the spot market with aggressive restocking. Stocks at China's six major coastal power groups had fallen to 12.64 million tonnes by May 5-sufficient for only 16.9 days of burn, near a four-year low.

Meanwhile, these utilities were actively preparing for the summer power surge, anticipating prolonged and intensified heatwaves during the peak season typically over June-August. The National Climate Centre’s forecast that an El Nino weather pattern could develop as early as May, potentially bringing extreme summer heat, further reinforced buying urgency. By May 9, the benchmark had jumped to RMB 833 per tonne, up RMB 27 per tonne from end-April.

The rally was further amplified by turbulence in the Indonesian coal market. Supply constraints under Jakarta's production quota system continued to limit spot availability, sending prices higher. After Indonesian 3,800 kcal/kg NAR (Net As Received) thermal coal prices had climbed from USD 60 per tonne on April 1 to USD 65.8 per tonne by May 7, this translated into the landed cost becoming higher than Chinese domestic cargoes of this grade, Mysteel's assessment showed.