Guosheng Securities released a research report stating that the Indonesian government plans to implement a package of policies in 2026 to proactively manage supply and support coal prices during a market downturn. As the world's largest coal exporter, Indonesia's significant voluntary production cuts are expected to be a pivotal force in rebalancing the market. This move will directly reduce supply availability in the international market, helping to draw down high global inventories and potentially catalyzing a rapid rebound in coal prices. Furthermore, amid expectations of tightening supply from major producing nations, market confidence is anticipated to strengthen, providing robust support for international coal prices and significantly improving the profitability of major coal enterprises.
Key views from Guosheng Securities are as follows:
Indonesia's coal production is projected to decline by approximately 5.5% in 2025 to 790 million tonnes, down from 836 million tonnes in 2024. South Sumatra's coal output in 2025 is estimated at 120.74 million tonnes, accounting for about 15.3% of the national total. Some mining areas in Sumatra are remote, lack deep-water ports, and rely on costly road or river transport for coal shipment, creating significant logistical bottlenecks. The South Sumatra provincial government has enacted a regulation banning all coal trucks from public roads starting January 2026, which is expected to reduce annual production capacity by approximately 10 million tonnes. Coal-producing regions in Sumatra face disadvantages in output contribution, production conditions, and cost control. Proactively guiding the orderly optimization of their high-cost, low-efficiency capacity is a rational choice for advancing the high-quality development of Indonesia's coal industry.
From January to December 2025, Indonesia's coal exports totaled 505 million tonnes, a 5.0% decrease compared to the same period in 2024. In terms of export destinations in 2024, China was the largest importer (34.9%), followed by India (23.1%), South Korea (6.8%), and Japan (6.7%). Exports from Sumatra accounted for only 14.8% of the total in 2025, characterized by high costs and thin margins. Optimizing capacity in this region is also beneficial for enhancing industry-wide concentration and fostering high-quality development.
From January to November 2025, Indonesia's coal export value (excluding lignite) was $22.17 billion, a sharp decline of 20.27% year-on-year. Export volume (excluding lignite) during the same period was 350 million tonnes, down 3.9%, indicating that the drop in value far exceeded the volume decline, with price being a more significant drag. Historically, non-tax state revenue from the energy and mining sectors has contributed over 50% to Indonesia's PNBP, meaning falling coal prices severely impact national tax revenue and the economy. Faced with revenue pressure, the Indonesian government needs to take action and prepare for more fundamental structural reforms in the coal sector.
The International Energy Agency forecasts that Indonesia's coal consumption will reach approximately 266 million tonnes in 2025, driven by population growth, an expected 5% economic growth rate, and a 7% increase in power demand. By 2030, Indonesia's coal demand is projected to rise to 337 million tonnes, with the power and metal processing industries accounting for the majority of the new demand. Coking coal consumption is expected to grow by more than 60% by 2030, positioning Indonesia to become the largest coal consumer in ASEAN and potentially the third-largest globally.
The package of new coal policies includes tightening the RKAB approval process, reinstating export taxes, and increasing the Domestic Market Obligation. These measures aim to reduce exports and support coal prices. As the world's top exporter, these policies are expected to directly limit total coal exports, reduce effective supply in the global seaborne coal market, and push up international FOB prices. The reinstatement of export taxes will also squeeze the already narrow profit margins of small miners, particularly those in Sumatra, weakening their competitiveness, accelerating their exit from the market, and intensifying upward price pressure. Tax revenue will also directly increase the Indonesian government's PNBP.
In November 2025, Indonesia's Minister of Energy and Mineral Resources issued new regulations concerning the Work Plan and Budget, introducing a dual penalty mechanism of "immediate suspension + quota reduction for the following year" for overproduction. Media reports on January 8 suggested the government may cut the 2026 coal production quota to around 600 million tonnes, significantly lower than the actual 2025 output of 790 million tonnes.
On November 26, 2025, Indonesia announced the end of its nearly 20-year coal export tax exemption, with exports to be taxed starting in 2026 based on a formula linked to global prices. On November 29, the tax rate range was specified as 1%-5%, and further refined in December to vary by coal type and price, with proposed rates of 5%, 8%, and 11%. According to new regulations, coal mining rights tax rates will adopt a progressive structure based on calorific value and mining method, linked to the government's HBA coal reference price. When the HBA price exceeds $90 per tonne for coal with a calorific value between 4,200-5,200 kcal, the tax rate for miners will increase by 1% compared to previous levels. For open-pit mines, rates will range from 5% to 13.5%. The combined impact of export taxes and mining rights tax reforms is expected to persistently increase the full-chain mining costs for Indonesian coal. This may result in future price declines hitting miners' cost thresholds more quickly, dampening their willingness to expand production or engage in distress sales, thereby establishing a firmer long-term price floor from the cost side.
As Indonesia's domestic coal demand continues to grow, coal companies will increasingly rely on the domestic market. Coupled with regulatory constraints, this points to a reality of reduced exports and production cuts. Based on cost statistics from Indonesian coal companies, the average cost for mainstream producers in H1 2025 was $37 per tonne. With global coal prices generally declining in 2025, the export price for Indonesian 3800K thermal coal fell to a low of $39 per tonne. This indicates that even excluding freight and taxes, profit margins for Indonesia's "low-calorific-value, high-cost" miners are severely compressed or have turned into losses. The rational response for mine operators and traders is to reduce or halt production to gradually rebalance supply and demand and support prices.
For investment targets, the report highlights CHINA QINFA, which directly benefits from Indonesian coal resource production and offers both growth and value. It also recommends KINETIC DEV, which is based in Inner Mongolia and Ningxia, explores overseas opportunities, and has布局 in the South African coal market. Companies to watch include YANKUANG ENERGY and YANCOAL AUS, which operate across the China-Australia markets and stand to benefit doubly from strengthening international coal prices and rising Chinese domestic prices. Indonesia's export contraction is expected to reduce supply to the Chinese market, creating potential for unexpected upside in domestic Chinese coal prices. The report recommends domestic-focused coal companies with high earnings sensitivity, such as YANKUANG ENERGY, and others, alongside defensive high-dividend industry leaders.
Risks include Indonesian coal policies falling short of expectations, international coal demand being weaker than anticipated, and Indonesian coal production exceeding forecasts.