China Merchants Securities stated that Indonesian mining officials announced on Tuesday that miners have suspended spot coal exports due to the government's proposed significant production cut plan. The firm believes this supply disruption will impact thermal coal more than coking coal, primarily because Indonesian coal resources consist largely of low-calorific value coal from open-pit mining. It is recommended to focus on companies with high exposure to spot coal and overseas operations, such as Yankuang Energy (600188.SH), as well as stable operators like China Coal Energy (601898.SH) and Shaanxi Coal Industry (601225.SH). The main points from China Merchants Securities are as follows:

1. Indonesia's RKAB preliminary review has tightened, making it difficult for miners to predict exportable volumes, leading to a suspension of coal exports. Indonesia's coal production operates under an RKAB quota system managed by the Ministry of Energy and Mineral Resources. After annual quota allocation, mid-year adjustments are permitted. Starting in 2026, the RKAB validity period will revert from three years to one year. Additionally, Energy Minister Bahlil Lahadalia indicated in early January that the 2026 coal production target is 600 million tons, down 130 million tons from the 2025 target and 190 million tons from 2025's actual output. Both measures signal the government's intent to strengthen mineral resource management and price control. According to Mysteel data, the preliminary RKAB review shows that 42 miners submitted a total production volume of 560 million tons, with 340 million tons approved, accounting for 60.7%. Due to Indonesia's Domestic Market Obligation (DMO), which requires miners to supply at least 25% of their annual output to the domestic market at below international prices, some miners have suspended exports and market transactions pending the government's final approval. The impact is currently greater on spot exports than on long-term contracts. Per Coal Resource Network, H.Kristiono, Vice Chairman of the Indonesian Coal Mining Association, stated that no spot Indonesian coal is currently available. He also mentioned that miners continue to honor long-term contracts, though some are considering cancellations due to force majeure.

2. Under this supply disruption, domestic thermal coal spot prices are expected to rebound. According to Indonesian statistics, the country exported 530 million tons of coal in 2025, representing 67% of its total output. China was the largest export destination, accounting for 40% of exports, or 210 million tons. For the full year, under different scenarios, China's imports of Indonesian coal could decline by 24.11 to 50.89 million tons. Scenario one: Assuming 2026 Indonesian coal production aligns with the ministry's guidance of 600 million tons, with export proportions and China's share unchanged from 2025, exports to China would reach 161 million tons, a year-on-year decrease of 50.89 million tons. Scenario two: Assuming mid-2026 RKAB quotas increase, raising production to 700 million tons, with export proportions and China's share unchanged, exports to China would reach 187 million tons, down 24.11 million tons year-on-year. In the short term, this supply disruption is likely to drive a rebound in domestic thermal coal spot prices. With Chinese mines approaching the Spring Festival holiday, supply elasticity from major production areas is relatively low. Thus, Indonesia's supply disruption is expected to have a short-term significant impact on domestic thermal coal spot prices. Subsequent supply-side attention should focus on post-holiday production resumption, changes in Indonesian miners' export capacity, and willingness.

Risks include significant fluctuations in Indonesian miners' export capacity and willingness, faster-than-expected post-holiday production resumption in China, and weaker-than-expected coal demand after the Spring Festival.