China's seaborne import thermal coal prices extended their downward spiral. A deluge of low-ball bids in utility tenders has fueled bearish sentiment, driven by a surge in prompt arrivals, plummeting international freight rates, and cooling geopolitical tensions in the Middle East.

Indonesian 3,800 Kcal/kg NAR coal, a bellwether for the low-CV import market, saw prompt offers slump to $66-66.5/t FOB on a Panamax basis, levels already undercut benchmark indices.

Several trading sources indicated that buying interest for prompt cargoes remained virtually absent even at the lower end of that range, as most utilities shifted demand for August shipments, with certain buyers probably helding out for further concessions.

Chinese traders' bidding prices to utility tenders for the same grade with prompt delivery were heard at 570-580 yuan/t CFR South China with VAT, down by 30-40 yuan/t from early June levels. Bids for August-delivering cargoes were largely around 580 yuan/t, though participants noted a clear downside bias as bearishness seeped into forward pricing. 

Sxcoal's tracking data showed on June 24 that a bid to a southern utility for August-delivering 3,800 Kcal/kg NAR coal fell to a low of 573 yuan/t, netting back to $64.88/t on a Panamax basis and $61.78/t on a Supramax basis.

Despite the overwhelmingly cautious tone, a few traders reportedly discussed August low-CV cargo deliveries at a $2/tonne discount to index-linked pricing, anticipating a late-summer demand recovery.

"Offers from Indonesian miners for August shipments are still pegged slightly above index, and virtually no miner is willing to take fixed-price risk," an eastern China-based importer source commented.

The rout was not confined to low-CV grades. Australian 5,500 Kcal/kg NAR coal faced similar pressure, with bidding prices to utility tenders softening to 870-890 yuan/t, CFR with VAT South China, equivalent to roughly $114.5/t CFR or $96.8/t FOB on a Capesize basis.

A growing number of trader sources have turned increasingly cautious on the July market outlook, pointing to lingering pressure from elevated inventories at southern ports and lacklustre procurement from utilities, who have largely restricted themselves to sporadic bargain-hunting.

Discharging queues at southern China ports remained protracted, while re-export opportunities to other Asian destinations have also narrowed amid softening regional demand, sources confirmed.

Rainfall-moderated temperatures have recently capped coal consumption at Chinese power plants. Compounding the demand-side weakness was increased hydropower generation and a potential recovery in gas-generated electricity.

Meanwhile, recent rainfall in coastal China has reduced temperatures and power demand, while boosting hydropower and moderating coal consumption at utilities.

The anticipated recovery in gas-fired power generation, supported by sliding LNG prices and recovering supply following the reopening of the Strait of Hormuz under a 60-day US-Iran agreement, adds a further layer of headwind to thermal coal burn.

The easing of Middle East tensions has already fed through to a sharp pullback in international freight markets. The Panamax rates for Indonesia-South China routes dropped to approximately $8/t, and Australia-China routes fell to $15/t or so, both slumping by over 30% compared with their early June levels.

Meanwhile, China's domestic coal production is anticipated to recover moderately as the Work Safety Month draws to a close, adding to availability in the domestic market and exerting additional downward pressure on prices.

With domestic buyers increasingly adopting a wait-and-see approach and utilities leveraging the softer market to secure lower-priced supplies in tenders, the outlook for import prices remains entrenched in a bearish trajectory. 

Market participants expected the next two to three weeks to be defined by ongoing inventory digestion, with any potential price floor contingent on a meaningful seasonal uptick in power demand

On June 25, the CCI index for Indonesian 3,800 Kcal/kg NAR coal was at $64.5/t FOB and $74.5/t CFR, both falling $0.5/t day on day. The index for Australian 5,500 Kcal/kg NAR coal was at $116.5/t CFR, down $2/t from a day ago.