News
02/02/26
Indonesian coal firms seek review of output quota cuts
Singapore, 2 February (Argus) — The Indonesian Coal Mining Association (ICMA)
has raised concerns over Jakarta's plans to sharply cut 2026 output quotas of
coal producers, a move it claims could leave companies unable to meet
contractual supply obligations. The Jakarta-based ICMA, representing producers
that account for two-thirds of Indonesia's coal output, said the cuts would
prevent producers from meeting their contractual commitments in exports and
domestic sales, in a letter to Indonesia's energy ministry (ESDM) on 31 January.
Several Indonesian coal producers have likely received new one-year work plan
and budget (RKAB) approvals for 2026, and have reported production cuts at
varying levels, market sources told Argus on 30 January. A handful of major coal
producers in key mining region Kalimantan likely received RKABs amounting to
cuts of 40-50pc, said several market participants. The ICMA has requested the
government to review the 2026 coal production quota cuts while considering the
sector's business viability, impact on employment and supporting sectors and the
broader economy. With production figures set significantly lower than proposed
by companies, there is a risk that producers will be unable to meet these
contractual obligations, which could lead to claims, penalties, and even
declarations of force majeure, it said. There are significant production cuts
ranging from 40-70pc, based on member reports, the ICMA said. The magnitude of
these cuts could reduce economic viability, making it difficult for producers to
cover fixed operating costs and other financial obligations to banks. Besides
producers, the move would also affect mining contractors, transporters, shipping
companies and other mining service providers. This situation could raise the
risk of loan defaults to banks and heavy equipment financing or leasing
companies. If this risk occurs widely, it will impact the stability of the
financing sector and economic activity in coal-producing regions, said ICMA. The
RKAB cuts come at a time when Indonesian coal prices have been pressured because
of oversupply and weak demand from two of the largest coal importers, China and
India, following an increase in domestic coal output in both countries. The
reduction in quotas could be a catalyst for the market and potentially support
prices that have been depressed over the past several months. The Argus-
assessed price of Indonesian GAR 4,200 kcal/kg coal sold on Supramax vessels
averaged $43.55/t fob Kalimantan during July-December 2025, down by 7pc compared
with the first half of last year. Several traders have not been able to make
offers in recent weeks because producers did not confirm laycans, citing a lack
of clarity on output quotas. This lack of clarity and reports of steep cuts to
RKAB quotas has contributed to a rise in Indonesian coal prices. The GAR 4,200
kcal/kg coal market for Supramaxes was last marked at $47.17/t fob Kalimantan on
30 January, up from $44.91/t at the start of the year. The RKAB for 2025 was
917.16mn t, although total output reached 790mn t last year. Jakarta early last
month indicated plans to reduce coal production in 2026 to around 600mn t to
rebalance the market, given that oversupply continues to weigh on prices.
Indonesia, the world's largest thermal coal exporter, shipped 514mn t in 2025,
according to the latest government data compiled by ICMA. Coal mining is a major
source of tax revenue for the southeast Asian country. Indonesia earned $12bn in
government non-tax state revenue from the mining and energy sector over 1
January-10 November 2025. By Ajay Modi Send comments and request more
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