Indonesia's plan to route coal exports through a new state entity is rattling traders and mining firms, raising concerns that a policy aimed at curbing revenue leakage could disrupt the world's largest seaborne coal market.
Indonesian president Prabowo Subianto's plan to channel coal and two other commodity exports through Danantara Sumber Daya Indonesia (DSI) was announced on 20 May, and it lacks sufficient regulatory, technical or operational clarity or stakeholder consultations, market participants said. The move is the latest in a series of policy shifts designed to tighten government control over the coal sector and boost revenues — changes that are steadily eroding investor confidence.
The government's 2025 decision to revert to annual RKAB mining quota approvals, scrapping the three-year system introduced in 2023, had already upended investment planning. "Whatever plans they had made on the basis of the three-year RKAB are of no use now," a Jakarta-based trader told Argus.
Cuts to production quotas and delays in approvals have forced some mines to halt operations, with vessels in some cases waiting at ports for up to a month without cargo, an Indonesian producer said. The proposed DSI framework adds another layer of uncertainty. "All calculations, projections and forecasts will change significantly," the producer said, adding that risks now extend beyond price volatility to unresolved legal and compliance questions.
A trader familiar with a Middle Eastern investment in Indonesia said frequent policy changes weighed on its investments, with the mining and trading group exploring ways to recover the exposure. An offtaker — a trader that finances mines in exchange for guaranteed supply — said a single-window export system may work for homogenous commodities, but coal's variability makes centralisation difficult. "There is a difference even between seams of the same mine," the trader said, noting his firm has suspended mine financing for six months because of RKAB delays and policy uncertainty. A second offtaker echoed this view, adding that coal's commercial complexity makes centralised sales — a core part of the DSI plan — impractical. Even within the same nominal grade, differences in specifications and end-use markets drive pricing.
An India-based trader said the erosion of investor confidence has been gradual, driven by successive policy changes spanning HBA-linked pricing, domestic market obligation (DMO) rules, sale proceed repatriation requirements and the 2022 export ban.
Chinese investment, largely focused on equipment supply and downstream processing, could also be indirectly affected. One large Chinese group with Indonesian coal assets said recent clarification from Indonesia suggest full implementation of DSI may be deferred to January 2027 and expressed doubts whether the policy will proceed in its current form.
Operational hurdles loom
Indonesia exports about 500mn t/yr of coal. Revised RKAB quotas may reduce output by approximately 100mn t this year, but volumes remain substantial, making centralised trading operationally challenging, market participants said.
"Even established trading houses struggle to manage 40mn–50mn t/yr," the Jakarta-based trader said. Handling Indonesia's full export volume could require as many as 900–1,000 specialists across coal grades and destination markets, and getting skilled and experienced headcount will be a challenge for the DSI.
Coal trading also involves multiple technical and commercial variables — calorific value, ash, moisture and sulphur content, blending requirements, freight logistics and payment terms — all of which require specialised expertise. Market concerns span mine planning, barge loading, trans-shipment logistics and dispute resolution.
"Will a counterparty dare to take a monopoly, sovereign entity to court or arbitration?" the trader asked.
The Indonesian Coal Mining Association (APBI) has warned that the absence of technical clarity on how existing contracts will transition could jeopardise long-term agreements, particularly multi-year offtake deals.
Policy rollout
Under current plans, exporters can continue normal operations from 1 June but must begin reporting transactions electronically to DSI, including documentation, financial details and counterparty information. An evaluation phase or the second phase will precede full implementation on 1 January 2027, when DSI is expected to assume the role of exporter of record across contracts, customs clearance and payments, according to a 26 May briefing.
Traders said the interim phase already appears difficult to implement, raising concerns about the future of hundreds of intermediaries active in the supply chain. But Indonesian authorities think that the appointment of Luke Thomas Mahony, a former director of Vale Indonesia, as DSI president director may support the execution, given his commodity trading experience.
Some participants expect the policy could ultimately be diluted, with DSI functioning more as a pricing or monitoring authority rather than a fully centralised seller. Precedents such as the East Kalimantan government's logistics systems — covering stevedoring and floating cranes — faced initial resistance from the industry but proved workable over time.
Others say Jakarta's primary objective is to ensure export proceeds are retained domestically, with stricter transaction monitoring through DSI helping address this. Prabowo has cited an estimated $908bn in lost revenue over the past 34 years from under-invoicing, transfer pricing and weak oversight.
The policy move comes at a delicate time for the country. Indonesia's currency has been among Asia's weakest performers in recent months, while the Jakarta Composite Index is down about 30pc since the start of the year. The government is seeking to strengthen public finances against an uncertain global backdrop, with geopolitical tensions adding to macroeconomic risks. Ratings agencies Fitch and Moody's also downgraded Indonesia's outlook earlier this year.
