SunSirs: Indonesia’s "State Monopoly" on Coal Exports Takes Effect: Is the Global Coal Market Facing a New Paradigm Shift?

According to China Energy News, while the world is still grappling with the energy shocks triggered by geopolitical conflicts, a new policy directive from the Republic of Indonesia (hereinafter referred to as "Indonesia") has sent fresh ripples through an already strained international coal market.

On May 20, Indonesian President Prabowo formally signed the Regulation on the Governance of Natural Resource Commodity Exports in Parliament. The regulation mandates that the export of three key strategic resources—coal, palm oil, and ferroalloys—must be conducted exclusively through government-designated state-owned enterprises acting as the sole exporters.

In his address, President Prabowo stated bluntly that over the past 34 years, Indonesia has lost approximately US$908 billion in national revenue due to the "underpricing and underreporting" of commodity exports. The primary objective of this new policy, he emphasized, is to "strengthen regulatory oversight and eradicate practices such as under-invoicing, transfer pricing, and the illicit flight of export earnings."

No sooner had the news broken than the Jakarta Composite Index (JCI) plummeted by over 3%, sending coal and mining stocks across the board into a sharp decline. This policy pivot—characterized by many observers as a "deep-seated manifestation of resource nationalism"—is poised to generate shockwaves extending far beyond Indonesia's domestic borders.

Escalating Controls

This new policy is not an isolated measure. A close examination of Indonesia's policy trajectory over the past six months reveals a clear and consistent logic: a steady tightening of controls over resource exports.

As early as the beginning of this year, the Indonesian government significantly slashed its coal production quota to approximately 600 million tons—a reduction of roughly 24% compared to the projected output for 2025. Concurrently, the Domestic Market Obligation (DMO) ratio was raised from 25% to 30%. In parallel, the Ministry of Finance has been advancing plans for a coal export tariff system, proposing a tiered rate structure of 5%, 8%, and 11%.

Following these measures of "output reduction" and "tax hikes," the newly implemented "state monopoly" represents the true pivotal step in this regulatory overhaul.

The new policy establishes a clear implementation timeline: June 1 to August 31 will serve as a transition period, during which private mining companies must gradually transfer their trading relationships to state-owned enterprises. Effective September 1, the policy will be fully implemented, granting designated state-owned enterprises sole responsibility for the entire export process—encompassing every stage from customs clearance and declaration to financial settlement. Following the conclusion of the transition period, all export operations will be consolidated under PT Danantara Sumber Daya Indonesia—a state-owned enterprise subsidiary of Danantara, Indonesia’s sovereign wealth fund. This entity will purchase coal directly from domestic sellers and subsequently resell it to foreign buyers.

This shift represents a strategic pivot from merely "curtailing volume" to "controlling the source"—meaning that cash flows generated from Indonesian coal exports must first be pooled within the state-owned platform before being distributed to the relevant enterprises. Consequently, "the new policy is relatively more irreversible in nature."

However, the specific details regarding the implementation of this policy remain shrouded in considerable ambiguity. On May 25, Geo Energy Resources—a natural coal mining group listed in Singapore—issued a statement noting that the Group had "not yet received any formal notification regarding this matter." The company anticipates that aspects such as the implementation framework, administrative procedures, and documentation requirements still require "further clarification."

A Sudden Contraction in Global Supply

Indonesia stands as the world's largest exporter of thermal coal; in 2025, its export volume exceeded 500 million tons, accounting for approximately 50% of the global thermal coal trade. Given this status as a "cornerstone" supplier, any decision to tighten the valves will inevitably trigger systemic repercussions.

Analysts point out that when the new policy is compounded by reductions in production quotas and constraints imposed by the Domestic Market Obligation (DMO), Indonesia's total coal exports for the year are projected to plummet by 30% to 40%—amounting to a reduction of roughly 120 to 150 million tons.

This sharp contraction on the supply side has already triggered a corresponding ripple effect on pricing. The price of Newcastle coal futures—the global benchmark for thermal coal—has surged by 31.68% year-to-date. In contrast, the price of thermal coal at China's Qinhuangdao Port has risen by only 22.4% over the same period, resulting in an "inverted price spread" of approximately 40 yuan per ton between international and domestic markets.

From the perspective of the Chinese market, Indonesia has long served as the primary source for thermal coal imports. These imports typically consist of "low-calorific" coal—ranging from 3,800 to 4,500 kcal—which is predominantly utilized by coastal power plants for blending purposes.

According to statistical data from the General Administration of Customs, China imported approximately 211 million tons of Indonesian coal in 2025, accounting for 43% of its total thermal coal imports.

The core impact of the new policy on China's coal market is twofold: it will "drive up import costs" and "further constrict import volumes." However, given China's high rate of domestic self-sufficiency and the availability of alternative supply sources to fill the gap, "the overall impact on national coal prices is deemed controllable and is expected to be primarily structural in nature." Putra Adhiguna, an energy analyst at the Energy Shift Institute, believes that this policy represents the Prabowo administration’s "boldest move to date to directly control national commodities." While it stands to boost fiscal revenue, he cautions that "corruption remains a critical issue to guard against" during its implementation.

Dinita Setyawati, an analyst at the UK-based energy think tank Ember, also notes that nationalization will grant Indonesia greater "bargaining power" in its resource-related negotiations with global superpowers; however, the ultimate effectiveness of this strategy hinges on whether the policy can be executed with transparency.

Short-Term Pain, Long-Term Geopolitics

As this new policy takes effect, the supply-demand balance in the global coal market is already precarious.

In addition to Indonesia’s production cuts, Australia is set to lose over 5% of its production capacity in the second half of the year as mining licenses expire. Meanwhile, Russia’s output continues to decline due to a lack of capital expenditure support, and approximately 50 million tons of U.S. thermal coal exports may gradually be diverted to domestic use. Consequently, a "tight global coal supply-demand balance is becoming an increasingly tangible reality."

On the Hong Kong stock exchange, China Qinfat—an operator focused on international coal resource development—saw its share price plummet by 27.84% on the day the news broke.

The market’s panic is not without justification: thermal power generation companies now face a dual squeeze—the rigid escalation of imported fuel costs on one side, and the constraints of domestic electricity price affordability on the other.

Power plants in coastal regions—such as Southern and Eastern China—which rely heavily on imported coal, may face adverse effects ranging from rising delivered costs to a loss of initiative in their procurement strategies. These disruptions are expected to become particularly acute during the peak demand periods of summer and winter.

The widening gap in imported coal supplies is now compelling an acceleration of the energy transition.

In April of this year, driven by a confluence of factors, the average spot electricity price in Guangdong province surged by 47.95% year-on-year. This high-price environment has further underscored the economic viability of "green electricity." Concurrently, as the nation’s "Dual Carbon" goals (peak emissions and carbon neutrality) have been systematically integrated into local government performance evaluations, the "green electricity premium"—the price surcharge for renewable power—has risen from a range of 0.05–0.1 yuan per kilowatt-hour to 0.1–0.2 yuan per kilowatt-hour.

From a broader perspective, Indonesia’s new policy signals an accelerating global shift in resource trade—moving away from a "market-led" model toward one of "state control." As key resource-exporting nations increasingly tighten the taps, resource-importing nations, too, face a pivotal moment requiring a fundamental reshaping of their energy security strategies. For Asian nations dependent on Indonesian coal, accelerating the search for alternative supply sources and adjusting their energy structures is no longer an optional choice.

SunSirs has been continuously tracking price data for over 200 commodities for nearly 20 years, please contact support@sunsirs.com for subscription.