Coal contractors face early hit from 2026 output cuts, industry group says

By Adianto P. Simamora

Mining contractors in Indonesia are likely to be the first to feel the impact of planned coal production cuts under the government’s 2026 Work Plan and Budget (RKAB), as lower output directly reduces activity at mine sites, an industry group said.

Bambang Tjahyono, Executive Director of the Indonesian Mining Services Association (ASPINDO), said contractors typically absorbed the initial impact because they carried out the majority of operational mining activities.

Around 85 to 90 percent of national coal mining operations are handled by contractors, he said, adding that when production targets are lowered, operational hours decline almost automatically.

“Equipment cannot simply be switched off. Leasing installments continue, minimum maintenance costs remain, while revenue drops sharply. This hits cash flow immediately,” Bambang said during a recent industry discussion in Jakarta organized by Indonesia Coal Mining Association (APBI).

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He said that much of the heavy equipment fleet used in coal mining remains under leasing arrangements, leaving contractors exposed to fixed financial obligations even when utilization falls.

ASPINDO also highlighted the labor implications with prolonged production cuts could lead contractors to reduce working hours, furlough employees or proceed with layoffs.

Many of these workers come from communities around mining areas, meaning the impact would be felt quickly at the regional level.

Bambang cautioned against assuming that aggressive production cuts would necessarily lift global coal prices.

“With China and India accounting for a larger share of global output, Indonesia has limited influence over international price benchmarks,” he said.

Sharp reductions, he warned, risk creating domestic economic strain without guaranteeing stronger prices in export markets.

Editing by Reiner Simanjuntak