The coal sector has erupted! On February 4th, coal stocks surged dramatically, with Yankuang Energy, China Coal Energy, Shaanxi Heimao Coking, Meijin Energy, Jinneng Holding Coal Industry Group, and Yunnan Coal & Energy all hitting the daily upside limit. Companies like Lu'an Chemical Environment Energy Development, Shanxi Coking Coal, Baotailong New Materials, Shanxi Coal International Energy Group, Xinji Energy, and Dayou Energy also experienced substantial gains. The coal ETF at one point soared over 7%, pulling the dividend index up by more than 2%. So, what exactly happened?

Market sentiment suggests the surge may be linked to news from Indonesia. Reports indicate the Indonesian government has proposed a substantial production cut plan, leading miners in the country to suspend spot coal exports. Data shows China is Indonesia's largest import market (importing 242 million tons in 2024, constituting 42.73% of Indonesia's exports). A suspension of exports could impact 5.3% of China's thermal coal supply, increasing inventory pressure for power plants in the southeastern coastal regions. Concurrently, domestic news regarding rising coal prices has also emerged. Positive developments for coal. Reports state that an Indonesian mining official said on Tuesday that miners in the country have halted spot coal exports due to the government's proposal for significant production cuts. Quotas issued to major miners last month are 40% to 70% lower than the 2025 levels, as part of the country's plan to bolster coal prices. In a statement last Saturday, February 1st, the Indonesian Coal Mining Association indicated that the production quotas approved under the annual work plan are substantially lower than last year's tonnage. Reductions for individual mining companies range between 40% and 70%, and some miners might be forced to cease operations if production falls below sustainable operational levels. As the world's largest coal exporter, Indonesia previously announced plans to cut annual coal production to around 600 million tons to support prices. Furthermore, the country also plans to impose an export levy on coal, which would further erode industry profitability. The association has called on the government to reassess the quota reduction plan, considering the practical operational feasibility for mines, warning that the move could lead to large-scale layoffs and loan defaults among mining companies. As the world's largest thermal coal exporter (accounting for over 25% of global trade), Indonesia's export suspension is expected to tighten supply and drive up international coal prices. Analysis suggests buyers may turn to Russia, Australia, and others, but it will be difficult to fill the gap in the short term. China, being the largest importer (242 million tons in 2024, 42.73% of Indonesia's exports), would see its thermal coal supply affected by approximately 5.3%. Additionally, a message concerning rising coal prices was visible on the investor interaction platform of the listed power company, Jianneng Energy. On February 2nd, in response to an investor inquiry, Jianneng Energy stated on the interactive platform that the sequential decline in its fourth-quarter net profit was primarily due to continuously rising coal market prices since the end of the third quarter of 2025, which increased the company's fuel costs. Indonesia emerges as the biggest variable for commodities. Judging from policy directions over the past six months, Indonesia appears to have become the most significant variable on the supply side of the commodity markets. A commitment to cut production made by Indonesia's Energy and Mineral Resources Minister, Bahlil, in mid-December last year triggered a rebound in nickel prices. An official from the Indonesian Energy Ministry confirmed on January 14th that the country's annual mining permit quota for this year would be reduced to 250-260 million wet metric tons, down from 379 million wet metric tons in 2025. As the situation develops, both Goldman Sachs and Macquarie raised their average nickel price forecasts for 2026 on Tuesday, citing expected tightening ore supply from Indonesia after signals of output restrictions. Goldman Sachs raised its 2026 nickel price forecast from $14,800 per ton to $17,200 per ton. The bank stated that prices could reach around $18,700 per ton by the second quarter of 2026, supported by tightening ore supply. Macquarie increased its forecast for the 2026 London Metal Exchange nickel average price from $15,000 per ton to $17,750 per ton. Macquarie noted that the net impact of Indonesia's supply-tightening policies led it to revise its global nickel market balance forecast from a previous surplus of 250,000 tons to a smaller surplus of 90,000 tons.

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