Thermal coal prices in China's main production regions have consistently declined since mid-November due to a surplus in supply, sluggish demand, and a weakening portside market.

Of the 90 coal mines surveyed by Sxcoal on December 17, one mine raised prices by 5 yuan/t, while 14 mines lowered prices by an average of 24.07 yuan/t. The remaining 75 mines kept prices stable.

China's coal production smashed new highs in November, with raw coal output reaching 427.98 million tonnes, rising 1.8% year on year and 3.93% month on month, according to the latest data released by the National Bureau of Statistics.

Sxcoal's data showed that coal output of 100 surveyed thermal coal mines in major producing regions totaled 12.64 million tonnes in the week ending December 13, 4.9% higher than the year-ago level and ticking up 0.08% week on week. The capacity utilization at these mines averaged 93.60%, the highest so far this year.

Though a few mines halted or capped production due to longwall changes or maintenance, most mines still operated normally without significant production cuts. Some even increased output to meet annual targets, contributing to loose thermal coal supply.

Additionally, coal stocks at northern ports stayed high despite modest reductions. North China Bohai ports (excl. Huanghua port) had 25.74 Mt of coal stocks as of early Dec 17, down 4.2% week on week, Sxcoal data showed. This dampened traders' enthusiasm for shipping coal from mines to ports, subsequently constraining mine-mouth offtakes.

Despite rising coal burns in winter, power plants are less likely to make large-scale restocking in the short run as their existing stocks hit historical highs. As of December 11, inland power plants held 99.08 million tonnes of coal stocks, down 1.75% on the week yet growing 7.4% on the year. They prioritized long-term contract coal shipments and only bought as necessary, reducing spot thermal coal demand.

Meanwhile, non-power sectors, such as chemical and methanol plants, showed weak demand. Chemical plants only made small essential procurements, while some cement plants held back on purchases after suspending operations. Some ceramics and glass even stopped lump coal restocking, partly due to lower capacity utilization.

In Ordos, Inner Mongolia, one miner reported 2,900 Kcal/kg NAR mixed coal with 0.5% sulfur 10 yuan/t lower at 251 yuan/t, mine-mouth with VAT. This was mainly due to increased inventory pressure resulted from limited coal trucks arrived at mines for loading.

Thermal coal prices have dropped to relatively low levels so far this year in Yulin, Shaanxi province. Shenmu 6,000 Kcal/kg NAR chemical coal with 0.3% sulfur fell 5 yuan/t to 665 yuan/t, mine-mouth with VAT, while lump coal (3-8 cm) prices stood at 780 yuan/t, falling 20 yuan/t. One miner expected prices to move lower further amid diminishing demand alongside production reductions at some coking and chemical plants.

"Washing plants and traders temporarily retreated from the market. Although we have not yet utilized full storage capacity, inventories are continuously growing," said a miner source based in Shanxi. He stated that prepayment customers were uncooperative, forcing a gradual reduction in production due to stagnating sales. The miner expected a turnaround around New Year's Day.

Thermal coal prices continued to slide in northern Shanxi. In Shuozhou, 5,500 Kcal/kg NAR slack coal with 0.8% sulfur was offered at around 550 yuan/t (excl. VAT), while 5,000 Kcal/kg NAR slack coal with 0.5% sulfur amounted to 490 yuan/t (excl. VAT), falling 50-80 yuan/t since early December. Mine-mouth offtakes showed no substantial improvements even after lowering prices.

Overall, thermal coal demand recovered slower than supply accumulation, adding to bearish sentiment in the domestic market. Lower-than-anticipated winter restocking, coupled with a "chasing highs, avoiding lows" mentality, has further dampened spot demand.

Some miners expected mine-mouth thermal coal prices to go down further in the near term, mainly owing to a lack of favorable support. Future attention should be paid to holiday arrangements of mines during the Spring Festival, downstream operating rates and destocking across the supply chain.

On December 17, Sxcoal assessed Datong 5,500 Kcal/kg NAR thermal coal at 650 yuan/t mine-mouth with VAT, down 15 yuan/t day on day, while that for Ordos 5,500 kcal/kg NAR declined 8 yuan/t to 590 yuan/t. Yulin 5,800 kcal/kg NAR coal was at 650 yuan/t, 6 yuan/t lower than the previous day.