By the end of June, China's coal stocks were estimated at about 300 million tons, equivalent to the country's coal consumption in one month, says the China Coal Transportation and Distribution Association in a report from state-run news agency Xinhua.
Last month coal prices fell $3 per metric ton, forcing many coal producers to halt or reduce production.
At Qinhuangdao in north Hebei province, said to be the world's largest coal-trading port, traders have experienced 11 successive weeks of falling prices.
"I stayed at Qinhuangdao port for two months and I sold nothing," an unnamed trader told China Daily newspaper. "No one is buying," he said.
Liu Feng, head of Baotou Zhengxing Material Co Ltd, a trading company specializing in steel and coal, said many coal mines in Inner Mongolia had stopped production because of the weak market. As a result, he said, the coal sector in Inner Mongolia was taking measures to reorganize and consolidate, thus affecting private investors' confidence.
"Coal prices are falling dramatically. Private coal companies are suffering. But the State-owned ones are strong enough to cope," Liu said.
Industry experts attribute the oversupply in inventory and falling prices to the country's slowed domestic economic growth, which prompted reduced demand from the steel, cement and electricity sectors.
China relies on coal for more than 70 percent of its energy needs.
Speaking at an economic forum in Australia last week, economist Ross Garnaut, a former Australian ambassador to China, said that China's hunger for Australian coal is likely to wane as it moves to a more energy-efficient economy.
The Lawrence Berkeley National Laboratory in California estimates China's coal demand will peak around 2030 due to replacement by other energy sources and that overall energy demand will plateau around 2040.
As part of China's 12th 5-year economic plan, covering 2011-15, China aims to cut fossil fuel dependence to 87 percent of energy supply and boost natural gas consumption to 8 per cent of energy supply.
Figures from China's National Energy Administration show that China's power consumption in the first five months of this year was 1.96 trillion kilowatt hours, up 5.8 percent year-on-year, yet the growth rate fell 6.2 percentage points from the same period of last year.
The Financial Times newspaper quoted an unnamed trader for a state-owned coal company as saying, "The glory days of big coal are already behind us. Now we are in a sunset period."