The Indonesian Coal Mining Association (ICMA) has raised concerns over Jakarta's plans to sharply cut 2026 output quotas of coal producers, a move it claims could leave companies unable to meet contractual supply obligations.
The Jakarta-based ICMA, representing producers that account for two-thirds of Indonesia's coal output, said the cuts would prevent producers from meeting their contractual commitments in exports and domestic sales, in a letter to Indonesia's energy ministry (ESDM) on 31 January.
Several Indonesian coal producers have likely received new one-year work plan and budget (RKAB) approvals for 2026, and have reported production cuts at varying levels, market sources told Argus on 30 January. A handful of major coal producers in key mining region Kalimantan likely received RKABs amounting to cuts of 40-50pc, said several market participants.
The ICMA has requested the government to review the 2026 coal production quota cuts while considering the sector's business viability, impact on employment and supporting sectors and the broader economy. With production figures set significantly lower than proposed by companies, there is a risk that producers will be unable to meet these contractual obligations, which could lead to claims, penalties, and even declarations of force majeure, it said.
There are significant production cuts ranging from 40-70pc, based on member reports, the ICMA said. The magnitude of these cuts could reduce economic viability, making it difficult for producers to cover fixed operating costs and other financial obligations to banks.
Besides producers, the move would also affect mining contractors, transporters, shipping companies and other mining service providers.
This situation could raise the risk of loan defaults to banks and heavy equipment financing or leasing companies. If this risk occurs widely, it will impact the stability of the financing sector and economic activity in coal-producing regions, said ICMA.
The RKAB cuts come at a time when Indonesian coal prices have been pressured because of oversupply and weak demand from two of the largest coal importers, China and India, following an increase in domestic coal output in both countries.
The reduction in quotas could be a catalyst for the market and potentially support prices that have been depressed over the past several months. The Argus-assessed price of Indonesian GAR 4,200 kcal/kg coal sold on Supramax vessels averaged $43.55/t fob Kalimantan during July-December 2025, down by 7pc compared with the first half of last year. Several traders have not been able to make offers in recent weeks because producers did not confirm laycans, citing a lack of clarity on output quotas.
This lack of clarity and reports of steep cuts to RKAB quotas has contributed to a rise in Indonesian coal prices. 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.
The RKAB for 2025 was 917.16mn t, although total output reached 790mn t last year. Jakarta early last month indicated plans to reduce coal production in 2026 to around 600mn t to rebalance the market, given that oversupply continues to weigh on prices. Indonesia, the world's largest thermal coal exporter, shipped 514mn t in 2025, according to the latest government data compiled by ICMA.
Coal mining is a major source of tax revenue for the southeast Asian country. Indonesia earned $12bn in government non-tax state revenue from the mining and energy sector over 1 January-10 November 2025.
