China's domestic thermal coal market remains driven by weakening supply-demand fundamentals, with tepid end-user buying interest and increasing supply outweighing bullish spillover from surging global energy prices.

Of the 90 coal mines surveyed by Sxcoal on March 9, three mines raised prices by 11 yuan/t, while 19 mines lowered prices by 18.53 yuan/t on average. The remaining 68 kept prices stable.

International oil and natural gas prices hiked, triggered by escalating geopolitical tensions, creating a storm for global energy inflation. However, Chinese thermal coal prices continued to slide.

The disconnect stemmed from distinctly domestic market dynamics. Mines yet to restart after the Spring Festival holidays are expected to resume normal operations this week. Many mines across have already run at full capacity, pushing overall supply to return to regular levels.

On the demand side, power plants firmly sat on the sidelines, refusing to secure spot supplies despite slightly recovering coal consumption. As of March 6, daily coal burns at plants under six major coastal power groups reached 744,600 tonnes, Sxcoal data showed, up 6.52% on the day and 15.39% on the week. Yet, the volume was still 7.63% lower than the year-ago level.

While industrial operation resumptions accelerated with steady growth in power and chemical coal needs, warmer-than-normal temperatures further curtailed residential power demand.

Existing fuel stocks at major coastal power plants could cover 18.19 days of consumption on March 6. Power plants faced no urgent replenishment needs, rendering further price rallies improbable in the short run.

"Recent price cuts fail to attract power generators, as they exhibit strong resistance to spot purchases, particularly at elevated pricing levels," insiders noted, adding that traders also lost interest in building positions.

Meanwhile, rail transportation costs also ticked up along with climbing oil prices. Price slides in certain thermal coal grades were eaten by rising freight rates, leaving limited arbitrage room for downstream buyers and further dampening their buying enthusiasm.

Metallurgical and chemical plants only made essential buys, and portside price declines prompted more traders to retreat to the sidelines. In anticipation of further downward corrections in third-party coal buy prices by a leading miner, railway station-based traders mostly eased purchases.

In Inner Mongolia's Ordos, only on-demand needs were observed. Downstream buyers mostly took a prudent approach. With inventory piling up, local miners had no choice but to lower prices.

A miner source cut prices for 3,700 Kcal/kg NAR mixed coal (S 0.7%) by 15 yuan/t to 211 yuan/t, mine-mouth with VAT, citing moderate sales and growing caution in the market.

Auction settlements in Shaanxi's Yulin slumped, with 5,900 Kcal/kg NAR slack coal (S 0.7%) diving 30 yuan/t to 600 yuan/t, mine-mouth with VAT.

"Demand remains sluggish, evidenced by a small number of coal trucks arriving at our mine. Inquiries also diminish," a Yulin-based miner said.

Nevertheless, fueled by persistently high import coal prices, some participants foresee further and sustained upward potential for domestic thermal coal prices.

On March 9, Sxcoal assessed Datong 5,500 Kcal/kg NAR coal at 607 yuan/t, mine-mouth with VAT, down 8 yuan/t compared to late last week, while Ordos 5,500 Kcal/kg NAR material dipped 4 yuan/t to 533 yuan/t. Yulin 5,800 Kcal/kg NAR grade fell 5 yuan/t to 600 yuan/t.