Indonesia’s steel growth exposes coking coal gap amid import reliance

By Dominikus

Indonesia’s expanding steel and coke industries are increasingly constrained by limited domestic coking coal supply, exposing a structural gap in the country’s coal-to-steel value chain even as downstream capacity continues to grow.

At the recent AsiaCoke 2026 conference in Jakarta, Hendri Tamrin, Director at metallurgical coal producer PT Alamtri Minerals Indonesia Tbk, said steady economic growth of around 5% is driving rising energy consumption and industrial activity, including steel demand.

The expansion of steel production is expected to significantly increase demand for metallurgical coal, particularly coking coal used in blast furnace-based processes. However, domestic availability remains limited.

Industry data presented by Elias Ginting, chairman of the Association of Indonesian Coke Industries (AICI), shows that Indonesia produces only around 3 million tons of coking coal annually—covering roughly 20% of total demand—while the remaining 80%, or about 14 million tons, is met through imports.

These imports are sourced from major producers including Australia, Russia, the United States, Canada, Colombia, and China, reflecting a diversified but import-reliant supply structure.

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The imbalance highlights a key constraint in Indonesia’s downstream ambitions. While coke production capacity has expanded rapidly—particularly in integrated industrial zones such as the Indonesia Morowali Industrial Park (IMIP)—the availability of suitable domestic metallurgical coal has not kept pace.

Government data presented by Director General of Mineral and Coal Tri Winarno shows that Indonesia holds around 31.95 billion tons of coal reserves. However, the resource base is dominated by thermal coal, with coking coal playing only a limited role in supporting domestic steel and metallurgical industries.

This mismatch suggests that Indonesia’s downstream growth is increasingly tied to external supply chains, particularly for higher-grade coking coal, leaving the sector exposed to global price volatility and potential supply disruptions.

The issue is gaining urgency as the government moves to extend Domestic Market Obligation (DMO) requirements to coking coal, aiming to secure feedstock for domestic industries. However, limited local availability means policy measures alone may not be sufficient to significantly reduce import dependence in the near term.

Market participants said the structural shortage of domestic coking coal is likely to influence cost structures, supply security, and investment decisions across the coal, coke, and steel sectors, particularly as demand from industrial clusters continues to rise.

The widening gap between downstream expansion and upstream resource availability underscores a broader challenge for Indonesia’s industrial strategy: while steel and coke capacity are scaling up, constraints in domestic coking coal supply may ultimately shape the pace and sustainability of long-term growth.

Editing by Reiner Simanjuntak