Indonesia thermal coal tightness shifts from underground to above ground

Indonesia's thermal coal output is expected to fall in 2026, but the decline in seaborne supply could prove more pronounced, highlighting a widening disconnect between headline production and the volume of coal actually available to overseas buyers.

Indonesia's 2026 coal production is expected to be about 720 million metric tons, above the initial 600 million mt RKAB target but below the 2025 production of about 790 million mt. At the same time, S&P Global Energy CERA expects thermal coal exports could fall toward 445 million mt, more than 50 million mt lower year over year, as regulatory approvals, domestic requirements and logistics restrict the volume reaching the international market.

Supply filters

The issue is not merely that Indonesia is producing less coal. It is that an increasingly complex set of regulatory, logistical and quality constraints can make the internationally available supply pool tighter than the headline production decline alone would suggest.

"The emerging constraint is therefore less about the amount of coal underground than the series of regulatory, logistical and commercial filters between the mine and an export vessel," said an international trader dealing with Indonesian cargoes.

Indonesian thermal coal shipments in the first half fell 8% year over year to 221.7 million mt, even as production reached 367.1 million mt, or 61.2% of the original 600 million mt RKAB target, according to CERA.

The disconnect became more pronounced during the dry season. Thermal coal exports fell to 36.9 million mt in August, down 25% year over year, according to S&P Global Commodities at Sea data.

Low water levels along parts of the Barito and Mahakam river systems forced suppliers to reduce barge loads, change schedules and, in some locations, halt movements, market participants told Platts. The disruption was particularly significant because much of Indonesia's inland coal production depends on river transport before reaching coastal loading points.

At the same time, regulatory approval became another constraint on physical availability.

By early October, about 95% of production-quota revisions had been approved, CERA analysts reported. But higher quotas were expected to take time to translate into production, while some incremental output could be directed toward domestic requirements rather than exports.

In September, three subsidiaries of Bayan Resources notified customers of force majeure after amendments to their 2026 RKABs had not been approved, according to an official company disclosure reviewed by Platts. Approval for an additional 15 million-20 million mt of production followed about a week later.

That episode illustrated how the relevant supply number can change at successive points in the chain: geological capacity, approved RKAB production, actual mine output, tonnes remaining after domestic obligations, logistically accessible coal and finally export cargoes available within a buyer's required loading window.

Pricing and trade flow impact

The distinction has had pricing implications. Platts assessed FOB Kalimantan 4,200 kcal/kg GAR coal at $68.20/mt on Sept. 1, up $6/mt from the start of August, before the assessment rose further to $76.25/mt on Oct. 2 amid higher market indications and continued supply constraints. The grade was last assessed at $78.05/mt on Oct. 29.

Supply tightness has also not been uniform across coal specifications. Market participants reported limited availability of ultra-low-CV 3,400 kcal/kg GAR coal in August, while some mid-CV Indonesian material attracted unusually high offer premiums.

That matters because a higher production approval figure does not necessarily resolve shortages in the grades buyers actually require. Indonesian coal varies substantially by calorific value, location and logistics route, meaning an additional tonne produced in one region or specification cannot always replace a missing tonne elsewhere.

The consequences are already extending beyond Indonesia. Constrained availability of Indonesian and Russian cargoes in September and early October prompted South Korean buyers to increase purchases from Colombia, South Africa, Canada and the US, despite the freight disadvantage of moving some of those tonnes into Asia.

Market sources said if production rises toward 720 million mt while export availability remains constrained, the headline production number may increasingly overstate the supply response visible to seaborne buyers.

The number that ultimately matters is not simply how much Indonesia can mine, but how many tonnes survive the journey from RKAB approval to production, domestic obligations, logistics, coal specification and finally a vessel available to the international market.