Indonesia's significant reduction in coal production quotas is expected to hasten the global coal market's entry into an upward cycle. Mining officials announced on Tuesday that Indonesian coal miners have suspended spot exports following the government's substantial output cut plan. Last month, production quotas issued to major miners were slashed by 40% to 70% compared to 2025 levels, as part of the country's strategy to bolster coal prices. Indonesia's coal output reached 790 million tons in 2025, down 5% year-on-year and notably lower than the initial quota of 917 million tons, reflecting a policy shift in March 2025 to control volume and raise prices for resources including nickel and coal. For 2026, Indonesia may further reduce its production quota to 600 million tons, a 24% decrease year-on-year. Indonesia exported 211 million tons of coal to China in 2025, accounting for 41% of its total exports. The contraction in Indonesian output is likely to lead to a continued decline in China's imports, with an estimated annual import volume of around 450 million tons in 2026, down by approximately 40 million tons. Overall, domestic coal prices are projected to end a four-year downward trend and resume growth in 2026, supported by stable domestic supply, a slight reduction in imports, and steady-to-recovering demand. The cyclical bottom for the coal sector was confirmed in the second quarter of 2025, with supply-demand dynamics showing a reversal. Starting in 2026, coal and its primary downstream sector, thermal power, are expected to enter a new upward cycle. Thermal coal prices have shown an off-season rebound. As of February 5, 2026, the Q5500 ex-stock price at Huanghua Port in northern China stood at 702 yuan per ton, up 2 yuan (0.3%) from the previous week. On the supply side, domestic production remains stable while imports continue to shrink, with total supply expected to decline slightly. Demand has improved significantly despite the traditional off-season, and third-quarter profits are anticipated to rebound. Coking coal demand is also expected to remain resilient during the off-season. As of February 5, 2026, the price of primary coking coal at Jingtang Port was 1,700 yuan per ton, down 80 yuan (4.5%) from the previous week. Despite a slight week-on-week decline in daily molten iron output, demand is likely to stay strong. Market review data shows that as of February 5, 2026, the price of primary coking coal at Jingtang Port was 1,700 yuan per ton (down 4.5%), while first-grade coke at ports was priced at 1,696 yuan per ton (down 0.5%). Combined coking coal inventories at three major ports totaled 2.663 million tons (down 4.9%), and the operating rate of coking enterprises with capacity exceeding 2 million tons was 79.18% (up 0.08 percentage points). Internationally, the Q5500 free-on-board price at Newcastle Port in Australia rose by $2 per ton (2.3%). The cost of shipping coal from northern Chinese ports was 38 yuan per ton lower than imported Australian coal. The landed price of Australian coking coal was $266 per ton, up $2 (0.6%) from the previous week, while the cost of Shanxi-produced primary coking coal at Jingtang Port was 131 yuan per ton lower than imported Australian hard coking coal. Risks include potential large-scale influx of imported coal and supply exceeding expectations.