21/05/26
Indonesia's commodity export plan rattles coal market
Singapore, 21 May (Argus) — Indonesian coal suppliers and buyers are assessing
the commercial implications of Jakarta's decision to channel exports of key
commodities such as coal and palm oil through state-owned enterprises (SOEs),
otherwise known as BUMN, which has created uncertainty around existing supply
contracts and raised questions over the role of traders. The 20 May announcement
is the latest in a series of policy changes that aim to give Jakarta tighter
controls over the country's coal mining industry and bolster prices. These
policy shifts follow a protracted downturn in prices that began in 2022,
although prices have since recovered. Argus last assessed Indonesian GAR 4,200
kcal/kg coal at $63.77/t fob Kalimantan for coal loading on Supramax vessels,
the highest since May 2023. The price increase has largely been driven by supply
concerns after producers faced delays in receiving their 2026 work plans and
budgets (RKAB), or output quotas. Other recent measures announced by the
government that aim to tighten controls include plans to slash coal output this
year, revising the validity period for RKABs back to one year from three
previously, withholding coal export sales proceeds in onshore bank accounts and
tweaking the domestic HBA coal reference price. Jakarta also previously
announced plans to introduce a coal export tax, although this has been delayed.
Indonesia is the world's largest exporter of thermal coal and shipped about
524mn t — more than half of total global seaborne supply — in 2025, although
this was down by 6pc on the year. Last year's decline in exports was the first
since 2020 when the Covid-19 pandemic weighed heavily on industry, denting
global demand and at the same time affecting supply chain logistics. Phased
rollout planned The latest policy will be rolled out in phases from June through
August. Exporters will gradually shift contracts, transactions and payment flows
to the BUMN, before the entity moves to full end-to-end control of transactions
from September. It is unclear if there will be one enterprise or multiple
entities, although a market participant said the BUMN could be linked to
Danantara Indonesia. The BUMN will initially cover coal, palm oil and
ferroalloys — commodities that accounted for around 23pc of Indonesia's total
exports in 2025 — with the scope subject to quarterly review and possible
expansion, according to research from Singapore's OCBC bank. The entity could
essentially work as a marketing agent and export coal procured from domestic
producers, traders said. President Prabowo Subianto cited an estimated $908bn in
lost revenue over the past 34 years due to under-invoicing, transfer pricing and
weak oversight of commodity export proceeds, arguing that tighter governance is
needed to capture the full value of strategic commodities. The move comes at a
time when the Indonesian currency has been among Asia's worst-performing in
recent months, reflecting pressure from capital outflows and global dollar
strength. The benchmark Jakarta Composite Index, representing 913 companies
spanning sectors including commodities and energy, is down 30pc from the start
of the year. Market participants said the absence of detailed transition
guidance is already disrupting trade flows. A Singapore-based coal trader said
there is no clarity on how existing contracts with shipments due this year will
be handled, and all market participants are awaiting more operational details,
which typically takes time to emerge in the commodity markets. Utilities in
parts of southeast Asia as well as in India are concerned about term supplies
and are seeking inputs from Indonesian suppliers on contracted deliveries.
Reaction from China, the biggest buyer of Indonesian coal, has so far been
cautious, with some market participants arguing that it will be difficult to
implement such a policy in practice. An Indonesian coal producer acknowledged
that it has received a number of calls from customers, seeking clarity on
whether it will be able to fulfil contracts, but added that there are no clear
answers as of now. Term supply contracts in focus The Indonesian Coal Mining
Association (APBI) warned that a lack of technical clarity on how current sales
will migrate to a BUMN-led structure could jeopardise long-term supply
agreements, particularly multi-year offtake contracts. The industry is seeking
confirmation on whether existing contracts will be honoured or will have to be
renegotiated. In the spot market, at least one low-calorific value (CV) coal
supplier has raised offers for July-loading Panamax cargoes of GAR 4,200 kcal/kg
coal by as much as 10pc. Broader spot offers may be withheld pending policy
clarity, traders said. While some market participants expect existing contracts
to be honoured at least through this year, uncertainty remains elevated.
Participants also raised broader structural concerns about the BUMN model. Coal
transactions involve multiple technical and commercial variables — including CV,
ash, moisture and sulphur content, vessel scheduling, blending requirements and
payment terms — requiring significant operational expertise. The questions in
the market range from operational issues involving mine planning to barge
loading and transshipment to the risk of disputes, a trader said. There is also
uncertainty surrounding long term off-take agreements between trading companies
and producers, some of which involve pre-payments and funding arrangements.
Traders with existing positions may face pressure to declare force majeure if
the policy disrupts their ability to meet contractual obligations, a market
participant said. The framework also adds another regulatory layer to an already
complex environment that includes domestic market obligation (DMO) rules, export
licensing, royalty adjustments, RKAB approvals, downstreaming requirements and
directives to park sales proceeds in Indonesian banks for at least one year. An
indirect policy impact could be on jobs that may be lost in the industry along
with the potential removal of competition in the sector. There are also
questions around the survival and existence of some trading and service
companies, an official with a large southeast Asian utility said. Authorities
will need to ensure private-sector incentives remain intact, OCBC said, warning
that concerns about crowding out could deter investments in the coal sector,
unless mitigated through policy clarity and ongoing engagement. Non-tax revenues
are closely tied to commodity prices and there could be market volatility
because of the plan, OCBC added. By Saurabh Chaturvedi and Andrew Jones Send
comments and request more information at feedback@argusmedia.com Copyright ©
2026. Argus Media group . All rights reserved.
