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The world’s biggest exporter of thermal coal, Indonesia, is not benefiting from tightening global coal markets amid an Asian switch to coal from gas due to the Middle East crisis choking LNG supply.
Indonesian thermal coal exports have been crimped this year by government production quotas and heightened uncertainties about Indonesia’s policy in the coal mining and exporting sectors. Earlier this year, the government slashed quotas for coal miners. In the middle of the year, authorities revised up some of the quotas, but uncertainties among Indonesia’s buyers remained.
Moreover, the strong El Niño has reduced rainfall and lowered river water levels, disrupting coal barge movements to export ports.
As a result, the top coal exporter saw its shipments drop by 23% in August from a year earlier, and by 6.54% from July. Indonesian coal exports were the lowest for the month of August in five years, according to data reported by the Jakarta Post.
The uncertain Indonesian coal policies are making buyers more anxious about seeking deals with the world’s biggest coal exporter, at a time when global coal demand is on track for a record high this year, due to the gas supply disruptions in the Middle East.
“Last year we did about 4 million tons of Indonesian coal sales; this year we’ll be lucky to get 2 million,” Matthew Boyle, head of research at trader Ashon International DMCC, told Bloomberg.
Soaring LNG prices due to the Strait of Hormuz blockage are prompting economies to shift to alternative energy sources, pushing coal demand to another record high this year, the International Energy Agency (IEA) said in its Coal Mid-Year Update 2026 earlier this month.
In the update, the IEA sees Indonesia’s coal output falling by more than 12 million tons this year, or by 1.5% from 2025.
“The government has lowered its coal production target to 641 Mt, well below the previous year, creating fresh uncertainty for both producers and international buyers,” the IEA said.
“Ongoing policy discussions over export taxes, revenue-sharing arrangements, mining permits and the possible centralisation of exports through a state-controlled entity have added yet more uncertainty.”
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