Indonesia's decision to indicate lower production quotas for coal miners this year is injecting fresh uncertainty into the seaborne thermal coal market, with producers and traders warning of operational disruption and tighter spot liquidity.
A number of coal producers have received indications of their 2026 work plan and budget (RKAB) approvals, signalling sharp cuts to output. The step is part of Jakarta's broader plans to curb output and exports in a bid to tighten seaborne supply and support prices at a time of prolonged oversupply.
The Indonesian Coal Mining Association (ICMA), which represents producers accounting for about two-thirds of national output, has urged the country's energy ministry to review the scale of the reductions. In a 31 January letter, the ICMA said reported cuts of 40–70pc could prevent producers from meeting export and domestic contractual commitments, potentially leading to claims, penalties or force majeure declarations. The association also warned of knock-on effects for contractors, transporters and lenders, citing risks to loan servicing and economic stability.
Jakarta's move was the main talking point at Coaltrans India 2026, a key industry gathering in Delhi. Participants at the event said there was confusion over whether the quota figures currently visible to mining companies on a government website are final. One producer said it has not received formal written notification and that numbers circulating in the market may not be definitive. Another mining firm said its quota is reflected on a government portal, but it may not be final. But the confusion has prompted coal producers to hold back their spot offers, which could lead to a delay in upcoming shipments. Indonesian producers have not confirmed any laycans so far this week.
Trading firm Equentia Natural Resources co-founder and chief executive Rajiv Ramnarayan said at the conference that Indonesian producers face acute planning challenges because of the purported cut and any potential revision to the order later this year during typical annual RKAB review might not help the industry. "It's not that easy to just turn the tap on and off," he said, noting that fleet deployment, mine sequencing, contractor mobilisation and shipping programmes are structured around approved volumes.
He added that lower quotas reduce spot cargo availability, hurting coal traders as producers prioritise long-term contracts.
Some participants at the event questioned the broader policy rationale. Coal remains a key part of Indonesia's resource base and is central to the country's overall revenue, with abundant reserves expected to support production for at least the next two decades, a coal trader said. A sharp structural reduction in output could affect the general premise of leveraging the reserves for economic benefit, employment and overall development, he added.
Some industry executives warned that Jakarta's strategy could backfire and prompt a review. Lower output would require a sharp and sustained rise in prices to maintain royalty receipts and allow companies to maintain revenue. But demand from China and India — Indonesia's two largest buyers — has been subdued, with both countries increasing domestic coal output and holding ample inventories. There could be some incremental supplies from other origins to partly bridge the gap emanating from Indonesia's production cut. Indonesian prices might not increase sufficiently to offset reduced volumes. So producers and the government could face declining revenues — a potential lose-lose outcome, a Singapore-based coal trader said.
Indonesia has yet to formally announce this year's RKAB and comment on the indicative quota cuts. It approved an RKAB of 917.16mn t for 2025, while actual output reached about 790mn t. Jakarta has indicated it may reduce 2026 production to about 600mn t to rebalance the market to support prices.
The Argus-assessed price of Indonesian GAR 4,200 kcal/kg coal sold on Supramax vessels averaged $43.55/t fob Kalimantan in July-December, down by 7pc compared with the first half of last year. The lack of clarity over this year's production quotas and indicative cuts to RKAB has contributed to a rise in Indonesian coal prices recently. The GAR 4,200 kcal/kg coal market for Supramaxes was last marked at $47.17/t fob Kalimantan on 30 January, up from $44.91/t at the start of the year.
