Indonesia, one of the world’s largest exporters of thermal coal, has introduced a new pricing benchmark that mandates exporters to align their sales with the country’s domestic coal reference price (HBA). Implemented on 1 March 2025, this policy aims to ensure fairer pricing for the government and coal permit holders by preventing the commodity from being sold abroad at rates below the local standard. However, the move has triggered uncertainty among international buyers, particularly in China, and raised concerns about a potential drop in demand for Indonesian coal.
The Energy and Mineral Resources Ministry’s decree, which enforces the use of HBA for export transactions, comes at a time when global coal markets are already grappling with fluctuating demand and oversupply in key regions. Critics argue that the lack of a transition period for renegotiating long-term contracts has left exporters and buyers scrambling to adapt, potentially jeopardising Indonesia’s position in the competitive global coal trade.
A Push for Fair Pricing Amid Global Resistance
Under the new rule, outlined in Energy Ministry Decree No. 72.K/MB.01/MEM.B/2025, Indonesian coal exporters are required to use the HBA not only for sales but also for calculating royalties. The policy is designed to protect national interests by ensuring that the government and permit holders receive appropriate revenue from coal exports. Tri Winarno, the energy ministry’s coal and mineral mining director general, emphasised this goal, stating that the benchmark price ensures “the right price” for stakeholders. 
However, the immediate enforcement of the rule, without a transition period, has drawn criticism from industry representatives. Fathul Nugroho, deputy chairman of the Indonesian Energy, Minerals and Coal Suppliers Association (Aspebindo), highlighted the challenges exporters face in renegotiating existing business-to-business contracts with overseas buyers. “We are asking the government to provide a six-month transition period to negotiate existing contracts,” Fathul told The Jakarta Post, warning that the sudden shift could lead to contract terminations by international buyers.
The disparity between the HBA and other global benchmarks adds another layer of complexity. For instance, the February 2025 HBA for high-quality Indonesian coal was set at US$124.24 per tonne, significantly higher than the Newcastle coal futures price on the ICE Futures Europe exchange, which averaged around $105 per tonne for the same period. This price gap has led to concerns that Indonesian coal may become less competitive, pushing buyers towards alternative suppliers.
China’s Reluctance and Market Shifts
China, a major importer of Indonesian thermal coal, has shown reluctance to accept the new pricing scheme. Reports suggest that Chinese companies, burdened by excessive stockpiles due to high domestic production and weak winter demand, may seek to cancel or renegotiate long-term contracts. The China Coal Transportation and Distribution Association has indicated that at least one major buyer has already suspended spot imports of foreign coal to manage inventory levels.
This resistance from Chinese importers could have significant implications for Indonesia’s coal export market. In 2023, Indonesia exported substantial volumes to East Asian countries, though demand from Japan and South Korea has declined in recent years. According to Statistics Indonesia (BPS), each country imported around 25 million tonnes in 2023, down from 28-30 million tonnes in prior years. If China, a key market, scales back further, Indonesia may need to pivot to other regions.
Fathul Nugroho remains cautiously optimistic about alternative markets, suggesting that countries such as Malaysia, the Philippines, Vietnam, Thailand, and parts of South Asia could absorb redirected exports if Chinese contracts are terminated. However, Hendra Sinadia, executive director of the Indonesia Mining Association (IMA), warned that pushback from other importers is likely, given the uncertainty surrounding selling prices and the status of existing contracts.
Industry Concerns and Broader Implications
Within Indonesia, industry leaders are grappling with the immediate fallout of the policy. Gita Mahyarani, acting executive director of the Indonesian Coal Mining Association (APBI), expressed concern that setting the HBA as the mandatory selling price could lead to a market shift away from Indonesia. “We are still trying to predict how buyers will react,” she noted, pointing to efforts by major importers like China and India to boost domestic coal production, which may further dampen demand for Indonesian exports.
The lack of a transition period exacerbates these challenges. Most coal exporters rely on long-term contracts, and the sudden imposition of the HBA has left little room for renegotiation. Without adjustments, exporters risk incurring higher costs due to increased royalties, especially when compared to the previously used Indonesian Coal Index (ICI) price, which often served as a reference for international transactions.
Beyond the immediate economic impact, the policy raises questions about Indonesia’s long-term strategy in the global energy market. Coal remains a cornerstone of the country’s export economy, particularly from regions like East Kalimantan, where barges laden with the commodity are a common sight along rivers in cities such as Samarinda. Yet, as global demand for fossil fuels faces pressure from climate goals and renewable energy transitions, Indonesia’s reliance on coal exports could become increasingly precarious.
Balancing National Interests and Global Competitiveness
The Indonesian government’s push to enforce the HBA reflects a broader effort to assert control over domestic resources and ensure equitable returns. Tri Winarno of the energy ministry reiterated that no official reports of contract cancellations or renegotiations with Chinese importers have been received as of early March 2025. This suggests that, for now, the full impact of the policy remains unclear.
However, the potential for a temporary drop in foreign demand, as predicted by industry experts, underscores the delicate balance between national policy objectives and global market dynamics. If buyers shift to other suppliers, Indonesia risks losing market share at a time when competition in the coal sector is intensifying. Countries like Australia and South Africa, also major coal exporters, could capitalise on any hesitation from Indonesian buyers.
Moreover, the policy’s timing coincides with broader geopolitical and economic shifts in the Asia-Pacific region. As China and India ramp up domestic production, and as East Asian nations like Japan and South Korea reduce coal imports in line with carbon reduction targets, Indonesia may need to diversify its export destinations or accelerate its own energy transition to mitigate risks.
Looking Ahead: A Test for Indonesia’s Coal Sector
Indonesia’s new coal pricing rule is a bold move to safeguard national revenue, but it comes with significant risks. The uncertainty surrounding international demand, coupled with the lack of a transition period for contract renegotiations, has placed exporters in a challenging position. While alternative markets in South-East and South Asia offer some hope, resistance from major importers like China could reshape trade patterns in the short term.
For now, the government appears committed to enforcing the HBA, with officials downplaying reports of immediate disruptions. Yet, as the global energy landscape evolves, Indonesia must navigate these challenges carefully to maintain its position as a leading coal exporter. The coming months will serve as a critical test of whether this policy can achieve its intended goals without alienating key trading partners.
At stake is not just the future of Indonesia’s coal industry, but also the broader question of how resource-rich nations can balance domestic priorities with the realities of an interconnected global market. As the world watches, Indonesia’s next steps could set a precedent for other commodity exporters facing similar dilemmas.
