Indonesia thermal coal policy uncertainty reshapes 2027 term contract protections

Indonesian coal miners and Asian buyers are holding back on signing 2027 term supply contracts as uncertainty over government-approved production quotas and changes to export rules clouds the supply outlook, with some miners adding protective clauses to any deals, market sources told Platts.

The delays come as Indonesia prepares to transition to a new export framework from Jan. 1, 2027, giving a bigger role to PT Danantara Sumberdaya Indonesia, or DSI, in supervising strategic commodity exports, including coal.

Negotiations for annual supply typically start during the fourth quarter, but sources said some talks were progressing more slowly this year. Some miners that have started negotiations are also changing contract terms, adding clauses that make supply commitments subject to their approved RKAB production quotas and domestic market obligation, or DMO, requirements, sources said.

The clauses are designed to protect miners from contractual disputes if they receive lower-than-expected production quotas or have less coal available for export after fulfilling domestic supply requirements.

"We might sign an umbrella contract for 2027 with a pre-condition of subject to RKAB approval. It is aimed at protecting miners from disputes if production approvals are lower," an Indonesian miner said.

Export contract uncertainty

Uncertainty around Indonesia's new export oversight system is another factor holding up negotiations.

DSI has said its initial role would focus on supervising and facilitating exports while commercial relationships between miners and overseas buyers continue. However, questions remain in the market over how the system will work in practice from Jan. 1.

During 2026, existing exporters have been allowed to continue operating while providing additional information under the new oversight system.

Some miners are also seeking contract protection against possible changes in export procedures or the level of oversight DSI introduces, market sources said.

"Not hearing any 2027 contract till now, but if any, contracts now will be subject to various conditions," another miner told Platts.

The uncertainty comes as miners are also waiting to know how much coal they will be allowed to produce in 2027.

Indonesia approves individual miners' annual production plans through the RKAB process. The 2027 submission period runs from Oct. 1 to Nov. 15, meaning miners currently negotiating annual contracts may not yet know their final approved production volumes for next year.

RKAB allocations were already a major issue in 2026. The Indonesian Coal Mining Association said earlier this year that lower production quotas could leave some producers unable to meet previously agreed supply contracts.

Market participants expect Indonesia's 2026 coal production to be around 720 million-730 million metric tons, compared with roughly 790 million mt in 2025. Some market sources expect the government to keep production at similar levels in 2027 as it seeks to control supply, although final volumes will depend on approved RKABs.

"We would rather rely on spot purchases at least until Q1 2027 than on terms, as obligations may not be fulfilled. If the production approved remains at 2026 levels, the market could remain tight in 2027 as well," a large Asian buyer of Indonesian coal said.

Price implications

The tighter supply situation has already pushed Indonesian coal prices higher in 2026.

Platts FOB Kalimantan 4,200 kcal/kg GAR rose from $45/mt levels at the start of January to $78.55/mt on Oct. 14.

FOB Kalimantan 5,000 kcal/kg GAR has also risen sharply. Platts assessed the grade at $61.25/mt on Jan. 2, with prices subsequently rising above $98.05/mt by Oct. 14 as Indonesian availability tightened amid producers prioritizing domestic supply while demand from China continues to support these levels.

Strength has also been seen in competing origins. Platts FOB Newcastle 5,500 kcal/kg NAR rose from $71.50/mt on Jan. 2 to $111.75/mt Oct. 14, while FOB Richards Bay 5,500 kcal/kg NAR reached $112.05/mt on Oct. 14, its highest since October 2023, supported by Asian demand and tight prompt availability from South Africa.

Market participants said progress on 2027 contracts would depend in part on greater clarity over miners' approved production volumes, DMO commitments and how the new export system will operate from January.