Indonesian thermal coal miners also faced unseasonal rains during the early part of the year which, coupled with voluntary supply cuts last year, limited the cargoes that were available and boosted prices.
"The third quarter of 2016 was characterized by an above average number or rain days and higher rainfall volume in July and September," major Indonesian coal producer Adaro Energy said in its quarterly report.
The company, however, said it is still on track to achieve its output target of 52-54 million mt for the full year.
"Supply rationalization in China, which came more restrictive than market expectations, combined with strong demand due to the hot summer in the country, have created supply tightness in the Chinese domestic market and pushed higher demand for imported coal," Adaro said.
"Aside from China, demand for coal in the Asian region also remained strong during the [third] quarter," it added.
Following a year of cost cutting and production cuts, suppliers have been unable to respond quickly to the increase in demand, the company noted.
The prolonged rainy season in Indonesia and infrastructure maintenance in Australia have intensified the supply tightness, it said.
Another Indonesian coal miner, PT Harum Energy, said it expects the wet weather to continue through the fourth quarter this year.
"Higher production volume beyond current levels will be dependent on market conditions entering H1, 2017," Harum said in its quarterly report.
In the seaborne market, the 90-day price of FOB Newcastle 6,300 kcal/kg GAR coal has more than doubled to $107.70/mt, from $49/mt at the start of the year, according to Platts data.
The price of FOB Kalimantan 4,200 kcal/kg GAR coal, a grade popular among both Indian and Chinese buyers, has surged 74% since the start of the year to be assessed Monday at $46/mt, Platts data showed.
"Our commodity team maintains our view that coal price should peak in Q4, 16 and gradually decline in 2017," Citi said in a note Thursday.
Given the steep rise in prices and supply cuts, Chinese utilities are facing the heat as they look to stock up for the upcoming northern hemisphere winter season.
The Chinese government has relaxed its policy on production cuts, but sources said any additional production is still to take effect, keeping seaborne coal prices on the rise.
Battling weak prices, several small to medium sized Indonesian miners had either shut up shop or significantly lowered their production last year.
Market participants voiced concerns that coal prices might come under downward pressure if such miners boost output or restart operations.
"Unfortunately, extended wet weather and the effect of the cost-saving measures implemented in the last few years have prevented many [Indonesian] producers from ramping up production quickly to take full advantage of the rising prices," Harum said.
"But we are starting to see more intensified efforts [in Indonesia] to ramp up production in the coming months," it added.
Harum expects supply to remain tight due to seasonal demand, supporting prices through the next year.
Some of the companys coal assets remain on temporary suspension through the fourth quarter, Harum said. "The company is reviewing its suite of assets and their start-up mine plans to justify development works."
But the company warned that any impact of coal supply relaxation in China and possible higher production in Indonesia and other countries may ease the current supply tightness, putting downward pressure on seaborne cargo prices.
Another Indonesian miner Tobabara said it is still on track to produce about 5-6 million mt this year, despite bullish near-term views.
--Deepak Kannan, firstname.lastname@example.org
--Edited by Jeremy Lovell, email@example.com