Indonesia output policy, competition to shape Asian coal markets in 2026

By Dominikus

Indonesia’s coal production policy and rising regional competition are set to reshape thermal coal supply and trade flows across Asia in 2026, while the country maintains its position as the dominant exporter in the region, industry official said.

Indonesia, the world’s largest exporter of thermal coal, accounts for around 40% of global seaborne coal trade and more than half of seaborne thermal coal supply, according to Gita Mahyarani, executive director of the Indonesian Coal Mining Association (APBI-ICMA).

The government has set a coal production target of about 600 million tonnes for 2026, down from 790 million tonnes in 2025, implying a potential reduction of more than 24% if fully implemented. Actual output, however, is expected to reach around 700 million to 730 million tonnes.

Even with a smaller reduction, lower output and rising domestic consumption are expected to tighten export availability. Around 32% of Indonesia’s coal production was absorbed domestically in 2025, driven by demand from power generation and downstream industries.

Exports to China are projected to decline by 25 million to 37 million tonnes in 2026, reflecting both supply adjustments and weaker Chinese import demand.

Indonesia’s export performance has already shown signs of adjustment, with thermal coal shipments falling by about 5.7% year-on-year in 2025, equivalent to roughly 30 million tonnes, as lower prices prompted some producers to cut output.

Supply changes have contributed to price movements in early 2026, with tighter Indonesian output supporting prices, although gains were partly offset by weak seasonal demand and competition from domestic coal in China.

At the same time, Indonesia continues to dominate key Asian markets. The country supplied about 44.2% of China’s total coal imports in 2025, equivalent to around 211 million tonnes, maintaining its position as the largest supplier.

Read also: Indonesia to raise coal output in 2026 on Prabowo’s directive amid price rally

Indonesia’s competitiveness is supported by its resource base and coal quality. The country has reserves of about 31.88 billion tonnes, with low-calorific coal accounting for more than 75%, making it suitable for blending in major markets such as China and India.

“Coal remains a critical energy source in Asia, particularly in the power and industrial sectors,” Mahyarani said.

However, competition is increasing. Russia has expanded its presence in Asia by offering discounted coal, while Mongolia is gaining market share in China through land-based supply routes. Australia continues to supply higher-calorific coal to premium markets such as Japan, South Korea and Taiwan.

Indonesia’s pricing remains closely linked to Chinese demand, particularly for lower-calorific coal used for blending. As Chinese buyers become more selective and price-sensitive, shifts in Indonesian supply have a direct impact on regional pricing.

Rising domestic consumption and policy-driven output controls are also reducing export availability, while increasing competition and changing demand patterns are shaping market dynamics.

Looking ahead, Indonesia’s production policy and domestic demand growth are expected to remain key factors influencing coal supply, pricing and trade flows across Asia in 2026.

Editing by Alexander Ginting