Indonesia plans to revise coal production quota timeline back to one year

Indonesia is considering reducing the production quota period from three years currently to one year, to ensure close monitoring for revenues amid the continuous fall of coal prices, Indonesia's Energy and Mineral Resources Minister Bahlil Lahadalia said during a parliamentary session on July 2.

The country initially introduced a three-year mining production quota, locally known as RKAB, in 2023 to reduce bureaucratic hurdles for miners and better prepare for long-term supply challenges. This included a provision allowing miners to propose excess output later in the year.

"Miners still have the window to revise output every year depending on sales, but for flexibility's sake, it's more firm if we do it every year," an Indonesia-based miner of high calorific value coal said.

"By shortening the planning cycle, the government can exert better control over production each year, potentially helping to stabilize prices of Indonesian thermal coal in the seaborne market," another Indonesia-based miner said.

A working meeting of the Indonesian House of Representatives, together with Lahadalia, also focused on strengthening regulations related to the land sale and purchase system for mineral and coal mining companies.

The Indonesian Ministry of Energy and Mineral Resources, or ESDM, has approved a maximum output quota of 917 million mt of thermal coal, slightly lower than the 922 million mt quota accepted for 2024. In 2024, Indonesia produced 835 million mt of coal, but the government has set a more conservative production target of 740 million mt for 2025.

The country's Central Statistics Agency, known as BPS, recorded a 4.65% decline in coal export volume to 156.37 million mt during January-May, compared to 163.99 million mt in the same period in 2024. The export value of coal also dropped by 19.10% to $10.26 billion from $12.68 billion, according to Pudji Ismartini, deputy for distribution and services statistics at BPS.

Prices for Indonesian thermal coal have faced downward pressure due to strong domestic production in major importing countries like China and India. This, combined with low coal consumption, has resulted in elevated stockpiles at ports and power plants.

According to India's Central Electricity Authority data, coal inventories at power plants in the country have exceeded 60 million mt over the past month, sufficient for about 20 days of coal burn. Prices have struggled to gain traction as the ongoing monsoon season decreased power consumption while increasing hydropower generation.

The prices for the most liquid grade, Kalimantan 4,200 kcal/kg GAR, averaged $46.88/mt in January-June, down from $56.20/mt a year ago, according to data from Platts, part of S&P Global Energy. The price was last assessed at $39.55/mt FOB on July 2.

Meanwhile, the Indonesian government is exploring coal export potential in ASEAN countries following the decline in demand from India, China, and Japan.