March 7, 2025
JAKARTA – Indonesia wants its domestic coal price benchmark to inform international pricing for thermal coal, but as importers appear reluctant to go along, the move causes uncertainty for export deals.
Since March 1, the Energy and Mineral Resources Ministry requires thermal coal exporters to sell the commodity using Indonesia’s coal reference price (HBA) to prevent Indonesian coal from being sold abroad at prices below the local benchmark.
Fathul Nugroho, deputy chairman of the Indonesian Energy, Minerals and Coal Suppliers Association (Aspebindo), expects the new rule to cause a temporary drop in foreign demand for Indonesian coal by increasing the asking prices of Indonesian exporters.
“The new rule is causing uncertainty in the current coal export transactions,” he told The Jakarta Post on Tuesday.
The China Coal Transportation and Distribution Association said Chinese companies may try to cancel or renegotiate long-term contracts because of the new rule, as reported by Bloomberg on Feb. 28.
Importers from China are reportedly unwilling to agree to the new pricing scheme, as years of high domestic production and imports, coupled with weak winter demand, have led to excessive stockpiles, Bloomberg reported, adding that at least one major coal buyer has suspended spot imports of foreign coal to reduce inventories.
However, Indonesia might shift its coal exports to other countries, such as Malaysia, the Philippines, Vietnam and Thailand, as well as some South Asian countries, if Chinese importers were to terminate contracts because of the new rule, Fathul said.
Coal exports to East Asian countries have declined in recent years, with Japan and South Korea each importing around 25 million tonnes from Indonesia in 2023, down from 28-30 million tonnes in the previous years, he explained, according to Statistics Indonesia (BPS) data.
Indonesia Mining Association (IMA) executive director Hendra Sinadia did not rule out the possibility that importers from other countries will push back against the rule, because there was “no certainty on selling prices and the fate of existing contracts.”
In response to the issue, the energy ministry’s coal and mineral mining director general, Tri Winarno, said that, as of now, there had been no official reports of cancellations or renegotiations of Indonesian coal exporters’ contracts with Chinese importers.
“We have not received any official reports,” Tri said on Tuesday, as reported by Kontan, emphasizing that the energy ministry enforced the use of the benchmark coal price for export transactions so that the government and coal permit holders “can get the right price.”
No transition period
The mandatory use of HBA prices, as per Energy Ministry Decree No. 72.K/MB.01/MEM.B/2025 on the determination of reference coal prices for March 2025 requires coal exporters to use the HBA when paying royalties.
With no transition period granted, exporters have not had time to renegotiate coal sales contracts, which are mostly long-term contracts, before the rule became effective, Fathul explained.
“We are asking the government to provide a six-month transition period to negotiate existing business-to-business contracts with overseas buyers,” he said, adding that such an adjustment period would be effective in preventing buyers from terminating contracts.
Most coal exporters would need to immediately renegotiate the contracts to avoid extra costs from rising royalties because of a disparity between the Indonesian Coal Index (ICI) price, which has often been used as the reference price by Indonesian exporters in the past, and the HBA.
For example, the February HBA for high-quality Indonesian coal was US$124.24 per tonne, far above the Newcastle coal futures price on the ICE Futures Europe exchange, where the February contract averaged $105 a tonne this month.
“The rule is relatively new, and we are still trying to predict how buyers will react,” Gita Mahyarani, the acting executive director of the Indonesian Coal Mining Association (APBI), told the Post on Monday, noting that attempts by China and India to boost their domestic coal production may reduce demand for Indonesian coal.
“We are concerned that, by setting the HBA as the selling price, there will be a shift in the market from Indonesia to other countries.”