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
