Chinese utilities are taking a cautious stance on purchasing spot seaborne imported coal, despite lower offer from traders, mainly due to substantial inventories and an ongoing decline in domestic thermal coal prices.

Power groups are reportedly seeking cargoes for delivery as far ahead as April next year, reflecting a strong inventory coverage both on hand and in transit, Sxcoal learned.

One state-run utility awarded three Panamax cargoes of 3,800 Kcal/kg NAR coal at 477.9 yuan/t CFR China with VAT for its Guangdong-based power plant through a tender closed on December 10, with the price translating to about $52/t FOB East Kalimantan. The three cargoes are requested to be delivered respectively in February, March, and April.

Despite ongoing transactions, overall demand from utilities remained low this week, with some power plants even canceling tenders.

A southern utility reportedly dismissed its tender that closed on December 10 for Panamax cargo of 3,800 Kcal/kg NAR coal, with delivery laycan scheduled for January-February, after receiving bids that netted back to $52-53.5/t FOB.

Chinese power utilities' holding out on purchases, despite reduced offering prices from traders, highlighted their bearish view on the near-term price trend.

Coal burns at power plants under six major coastal power groups only rebounded by 0.44% week on week and 5.21% month on month as of December 9, as comparatively milder temperature in southern China and restrained industrial activities hindered improvement in power usage.

Coal stocks held by these plants were enough to cover 17.78 days, falling only marginally from the preceding week and the month before, yet still 0.89 day higher than the same period last year, Sxcoal's data showed.

Besides, record imports, mainly comprised of long-term contract coal from major foreign miners, have also limited the demand for purchases from the spot market.

The tender-awarded prices for the sought-after 3,800 Kcal/kg NAR coal were $2-3/t lower than offer levels, prompting traders to further press down their buying levels to mitigate losses.

While some offers for Panamax cargoes of the same-CV coal were heard at about $53-53.5/t FOB for late December-early January delivering laycan, trades were reportedly done at prices as low as $52.5/t, trader sources said.

Offers of January-loading Supramax cargoes of the same-CV coal were heard at $52-52.5/t, yet buyers' indicative levels were around $50.5-51/t.

Prices of Australian 5,500 Kcal/kg NAR coal also fell quickly this week to $83-84/t FOB due to inactive purchases from end users. A seller reportedly offered $82.5/t for a shipment but faced last-minute buyer withdrawals, contributing to bearish sentiment in the market.

China's weak appetite may also be partly ascribed to the reduced price advantage of seaborne coal after domestic prices floated lower.

Thermal coal prices at northern China transfer ports are projected to keep declining after reaching a 15-month low, driven by ongoing weak demand and high inventories that have weakened sellers' bargaining power.

Traders saw significantly more offers for 5,000 Kcal/kg NAR coal at below 700 yuan/t FOB northern ports, with no signs of bottom support in sight.

"When prices fall to a key support level, participants usually expect stabilization; however, this time, a swift breach suggests there could be a further decline next week," said a Hebei-based trader source.

Mine-mouth prices maintained the downtrend on December 12, with some miners adjusting down prices by 10-20 yuan/t to spur sales. Some mining areas experienced a rise in truck arrivals after price cuts, alleviating inventory pressure, while other miners faced continued sluggish sales as traders remained largely inactive.

Sxcoal's data showed that 12 out of 90 mines surveyed on December 12 cut prices averagely by 23.25 yuan/t, no mine raised prices, while the rest maintained prices unchanged.