China's thermal coal prices were stuck at 780 yuan ($118.5) for a fourth week, with traders and buyers expecting prices to fall in coming weeks as heating demand slackens and supply improves.
China's steam coal prices began a downward trend in early December and have shed around 22 yuan per tonne since its 2010 peak struck in November.
Coal with a heating value of 5,500 kcal/kg stood at 775-785 ($118.50-$119.68) on Friday, while inventories at top coal port Qinhuangdao were down about 2 percent at 7.28 million tonnes from a week ago, data from industry website sxcoal.com showed.
"There is more supply coming into the market because rail transport is improving on the back of warmer weather," said a coal trader based in Guangzhou. "The general market sentiment seems to be that prices could start moving lower as we enter a seasonal demand low."
A second trader said talks that some carriages on the coal rail network would soon be changed to those with 80 tonnes, from the current 70 tonnes, were also damping market sentiment as that means supplies from northern provinces would significantly increase.
Despite stronger demand during winter months, Chinese coal prices have struggled to move higher, even as sea ice in Bohai slowed imports earlier this month and as international prices spiked.
Domestic traders also blamed soft prices on Beijing's determination to control inflation, as price pressures on goods, excluding food, were at their highest in at least a decade.
"With inflation the No. 1 focus, the government will continue to keep spot coal prices in check and that doesn't bode well for the market," said a Chinese coal trader.
On imports, Chinese buyers said Australian and South African coal was uncompetitive at current levels and would not price into the domestic market. Although they have been scouting for sub-bituminous material from Indonesia, offer prices were at best just 10 yuan lower than Qinhuangdao rates, giving them little incentive to import.
Analysts and some traders have said the steep discount for Chinese versus international thermal coal prices could persist through the first half of the year, as global values are bolstered by rain-led output disruptions and Chinese demand enters a seasonal lull.
Australia's thermal coal prices, a benchmark for Asia, climbed above $126 per tonne as news of a force majeure at Xstrata's Ulan mine in New South Wales boosted prices.
With Chinese domestic prices trading at a discount to Australian rates, overseas traders said Chinese producers were still actively offering cargoes to Japanese buyers and were also expected to kick off annual price negotiations with South Korean utilities soon.
