Demand for Australian thermal coal seems to be on the decline as vessel queue at Newscastle port's three coal export terminals hits a seven-month low.

There were 27 vessels with Notified Arrival Time (NAT) allocated and in transit Monday, showed the New South Wales Port Authority's weekly operations report.

Some 14 vessels were off the port waiting to load and 5 vessels in the port loading.

"A combined vessel queue of 27 is the lowest for the three terminals since August 17, 2014, and well down on a combined queue in the mid to high 50s in early February when Chinese utilities were stockpiling for the Lunar New Year," Platts said.

Based on Platts data, month-to-date throughput for March was 12.2 million mt, annualizing to 154 million mt.

The subdued demand is seen also at vessel queues at Queensland terminals,  Gladstone and Dalrympl, which are battling to keep the numbers with average limits.

The drop in the demand is believed to be influenced mostly by a fall in demand from China. Namely, the country announced plans to institute a reduction in thermal coal consumption by 160 million tonnes over the next five years to cut pollution.

"Demand from China for thermal coal out of Australia continues to soften and we don't expect this to change in the immediate future," Platts quoted an analyst as saying, adding that the demand remains relatively healthy.

"We also expect Japan will continue to account for the bulk of Newcastle exports well into the future, though India may present some stronger competition in coming years," the analyst added.