Miners across China's key thermal coal production hubs were encouraged to push for further price rallies on August 20 amid persistently tight supply and low inventories. However, the pace of gains started to moderate as resistance built on the demand side.

According to Sxcoal's latest weekly survey covering 160 thermal coal mines in Shanxi, Shaanxi, and Inner Mongolia, 39.38% of surveyed mines raised prices by an average of 27 yuan/t over August 13-19, while only 0.63% cut prices by 2 yuan/t on average. High-CV cargoes saw larger gains, with certain grades posting cumulative week-on-week increases of 20-30 yuan/t.

Constructive sentiment prevailed in the mine-mouth market, mainly attributed to supply-side curbs. The capacity utilization rates at Sxcoal-surveyed mines averaged 85.22% in the week ended August 19, inching up 0.28 percentage point from a week ago, as a handful of previously halted mines resumed after rectification.

However, the modest recovery was largely offset by fresh stoppages. "Our production will be halted for maintenance starting today, with normal operations expected to restart on September 1," a miner in Shaanxi's Yulin told Sxcoal.

Authorities across key mining regions all took action to intensify production safety in the near term, leaving output growth capped. Moreover, some private mines that have already fulfilled monthly production targets are likely to suspend or curtail output soon, reinforcing expectations that mine-mouth supplies will hover at low ebb through late August.

In addition, market rumors regarding capacity expansion approvals in Shanxi have yet to be fully confirmed. And given the lengthy approval process and persistent safety inspections, substantial supply release is unlikely in the short run.

Demand-side support, though less vigorous than earlier in the summer, did not fade away. Affected by the lingering El Nino, hot, humid weather persists across northern and southern China, with the subtropical high keeping apparent temperatures above 35 degrees in many areas.

Power plant consumption stayed at relatively elevated levels so far this year despite minor reductions, sustaining phased restocking to meet essential cooling needs. Daily coal burns at plants under six major coastal power groups stood at 930,800 tonnes on August 19, still 2.08% higher than the year-ago level, Sxcoal data showed.

Furthermore, the upcoming traditional "Golden September and Silver October" peak season for non-power sectors lent additional support, prompting chemical and metallurgical users to make steady purchases in advance. High-CV coal was particularly sought after. This, combined with good demand from several railway station-based traders, kept mine sales smooth.

Overall inventories corroborated tight supply and decent demand. Total coal inventories at Sxcoal-surveyed mines fell by 0.34% week on week to 3.82 million tonnes on August 19, hovering at historically low levels.

Specifically, a Yulin-based miner reported minimal inventories due to limited output disrupted by longwall moves and active shipments from traders, thus repeatedly raising prices. Chemical-purpose 5,900 Kcal/kg NAR slack coal (S 0.22%) gained another 10 yuan/t to 750 yuan/t, mine-mouth with VAT.

"Orders are still mainly coming from washing plants. They source resources for blending needs, and then deliver them to chemical plants," a miner in Inner Mongolia's Ordos noted. 5,700 Kcal/kg NAR slack coal (S 0.52%) enjoyed decent offtakes, with prices up 5 yuan/t to 720 yuan/t, mine-mouth with VAT.

Nevertheless, headwinds are accumulating. Power plants, while maintaining long-term contract intakes, were showing mounting resistance to pricier spot cargoes.

Heavy rainfall is also complicating the demand outlook. Over August 20-22, frequent rain is forecast across northeastern and northern China, while the southern China coast is also expected to face heavy downpours amid the southwest monsoon. Such conditions are likely to temper cooling demand and press down coal burns at power plants, prompting some end users to ease spot restocking.

"The weakness in downstream demand is clear to see. Portside stockpile slots are tight, and inventory is building up, further weighing on mine-mouth coal sales," said a miner in Shanxi's Shuozhou.

On August 20, Sxcoal assessed Datong 5,500 Kcal/kg NAR coal at 726 yuan/t, mine-mouth with VAT, unchanged day on day, while Ordos 5,500 Kcal/kg NAR material rose 2 yuan/t to 680 yuan/t. Yulin 5,800 Kcal/kg NAR grade gained 4 yuan/t to 753 yuan/t.