Thermal coal prices across China's major mining regions continued the uptrend on August 6 along with buoyant market sentiment and steady downstream restocking, as well as consistent supply constraints in early August. Yet, lingering caution from price-sensitive buyers still weighed on the mine-mouth market.

The supply-side tightness remained the dominant driver behind the price strength. The start of August freed up fresh monthly production quotas at mines. In Inner Mongolia's Ordos, thermal coal output slightly ticked up after some mines that had halted upon fulfilling July's production tasks resumed operations. However, this was offset by declines elsewhere amid multiple headwinds.

According to Sxcoal's latest weekly survey covering 160 thermal coal mines in Shanxi, Shaanxi, and Inner Mongolia, capacity utilization rates at surveyed mines averaged 83.36% in the week ended August 5, down 0.83 percentage point week on week.

In Shaanxi's Yulin, tighter safety inspections forced several mines into maintenance and rectification, trimming regional output. In Shanxi, a number of mines were suspended for exceeding production approvals, combined with still-offline ones, eroding overall capacity utilization.

In addition, safety inspections intensified to prevent flood accidents and natural disasters given potential rainfall across northern mining regions. This would hinder both coal production and outbound shipments, keeping supply recovery in check in the short run.

On the demand side, widespread heat steadily lifted residential electricity consumption and coal burns at power plants. Central and eastern China will see consistently high temperatures, with maximum figures in some localities expected to surpass 38 degrees Celsius, according to meteorological forecasts.

As such, daily coal burns at power plants under six major coastal power groups fluctuated upwards, reaching 946,500 tonnes on August 5, 6.37% higher than the year-ago level, Sxcoal data showed. While relatively elevated coal stockpiles built earlier provided a buffer, sustained inventory drawdowns at power plants still prompted some generators to source spot supplies.

On-demand power restocking, coupled with steady purchases from chemical plants, smoothed offtakes at mines. Meanwhile, portside price upticks and a leading miner's third-party coal buy price hikes fed market optimism, spurring active loading activities from nearby railway stations.

As such, total coal inventories at Sxcoal-surveyed mines amounted to 3.79 million tonnes on August 5, down 1.17% week on week, encouraging more miners to test price upticks.

"Prices have risen by a total of 10-20 yuan/t recently amid strong demand. Our shipments are moving steadily," a miner in Shanxi's Shuozhou said, offering slack 5,000 Kcal/kg NAR coal (S 1.2%) at 545 yuan/t, excluding VAT.

Similarly, an Ordos-based miner reported near-zero coal inventories, raising prices for 5,400 Kcal/kg NAR washed slack material by 20 yuan/t to 656 yuan/t, ex-washplant with VAT. "Chemical plants and railway station-based traders made active purchases, and certain PCI-purposed resources were also transported to ports," the source added.

Auction results posted larger gains in Yulin. Some miners tentatively increased offers by 5-10 yuan/t, with 5,700 Kcal/kg NAR slack coal up 6 yuan/t to 701 yuan/t on August 6, mine-mouth with VAT.

Certain premium high-CV grades, enjoying significantly decent sales and limited availability, reported over 40 yuan/t price growth. 6,200 Kcal/kg NAR washed grade was heard concluded at 751 yuan/t, ex-washplant with VAT, jumping 48 yuan/t from the last auction, Sxcoal learned.

However, such price increases were accompanied by fading acceptance among downstream buyers. "Slack 6,000 Kcal/kg NAR coal (S 0.35%) was offered at 750 yuan/t, mine-mouth with VAT. Over 5,000 tonnes were put up for auction, yet slightly over 3,000 tonnes were sold. End users were reluctant to accept the current high pricing," a Yulin-based miner confirmed.

Moreover, persistently unprofitable port-bound shipments cooled buying enthusiasm among traders. A few mines that raised prices subsequently reported slower offtakes, forcing marginal rollbacks.

A further blow came from potentially eased heatwaves. Southern China is forecast to receive persistent rainfall. Around August 9, Typhoon Dolphin is expected to bring heavy wind and rain to eastern regions, possibly lowering temperatures and capping coal consumption growth at power plants.

Inventory drawdowns at plants did not reach a threshold that would spur large-volume restocking, keeping overall demand recovery measured. Near-term price movements are likely to remain modest in either direction.

On August 6, Sxcoal assessed Datong 5,500 Kcal/kg NAR coal at 713 yuan/t, mine-mouth with VAT, up 4 yuan/t on the day, while Ordos 5,500 Kcal/kg NAR material gained 6 yuan/t to 645 yuan/t. Yulin 5,800 Kcal/kg NAR grade rose by 3 yuan/t to 706 yuan/t.