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Amy Sood

Indonesia’s decision to force coal exporters to adopt a government-set benchmark price has rattled Chinese firms – its biggest customers – and triggered warnings that the move could erode Jakarta’s edge in the global market.
The regulation went into effect in March, after Indonesian Energy Minister Bahlil Lahadalia announced that coal exporters would need to start using the government’s benchmark price, known as Harga Batubara Acuan (HBA).
Bahlil said using the HBA would ensure that Indonesian coal was not sold internationally at prices below the local benchmark, as independent pricing agencies had significantly reduced their rates compared to Indonesia’s benchmark.
Historically, the government used the HBA to determine royalty fees for coal miners, while the Indonesia Coal Index was used in pricing transactions. The new policy would mean that international sales would need to align with the HBA.
The Indonesian Energy, Mineral, and Coal Suppliers Association (Aspebindo) welcomed the move, with its deputy chairman Fathul Nugroho saying that adopting the HBA price would give Indonesia greater control over its coal pricing in the global market.
“Using HBA will better reflect rising mining costs, including increasing stripping ratios, land acquisition expenses, and fuel prices,” Fathul said when the regulation was announced at the end of February.
After the policy was implemented on March 1, however, Fathul told The Jakarta Post he expected the new rule to cause a temporary drop in foreign demand for Indonesian coal.
“The new rule is causing uncertainty in the current coal export transactions,” he said.
Ahmad Zuhdi Dwi Kusuma, a mining industry analyst from Indonesia’s state-owned lender Bank Mandiri, said the government was hoping to “stabilise its domestic coal prices to protect industries like electricity, manufacturing, and smelting from global market volatility”.
By establishing the HBA as the reference price, the government ensured more predictable revenues from royalties and taxes, secured affordable energy for strategic sectors, and maintained political stability, particularly in coal-producing regions, he said.
But the move has unsettled some Chinese firms, which make for Indonesia’s largest buyers. The China Coal Transportation and Distribution Association expressed in a statement following Bahlil’s announcement that if Indonesia’s new policy significantly increased prices, it could cut down trade profits and discourage purchases from Chinese buyers.
Importers from China are reportedly hesitant to accept the new pricing scheme, as years of high domestic production and imports, combined with weak winter demand, have resulted in excessive stockpiles. Bloomberg reported that at least one major Chinese coal buyer had suspended spot imports of foreign coal to help reduce inventories.
Analysts say there are concerns that in the long term, Indonesia may lose its competitiveness to other suppliers over the new regulation.
“Internationally, there is already pushback, especially from major buyers like China, who are concerned about the lack of market flexibility,” Zuhdi said.
“Over time, this could drive investors and buyers towards alternative suppliers like Australia or South Africa, weakening Indonesia’s position in the global coal market.”

Maximising revenue
Indonesia’s coal production reached a record high in 2024, totalling 836 million tonnes, up from 775 million tonnes in 2023, according to data from the energy ministry. Of this, around 555 million tons were exported, representing about 35 per cent of the global coal market.
According to Fabby Tumiwa, executive director at the Institute for Essential Services Reform think tank and an energy-transition strategist, the government’s intention is to “maximise revenue from not only coal but all minerals”.
“Because Indonesia is one of the major producers and top exporters, the thinking behind it is that we should be able to set the price, and not depend on other markets,” he said.
Fabby noted, however, that Indonesia’s new regulation introduced uncertainties as miners and exporters must adjust their contracts that usually contained specific price references, and that could pose challenges.
“A number of miners in the Indonesian Coal Association have shared their concerns regarding this regulation, citing all the difficulties they are going to have with their buyers,” Fabby said.
“Some are afraid that buyers will turn away from Indonesia, but all is quite speculative right now, and more time will be needed to see the long-term impact.”
Ghee Peh, an energy finance analyst at the Institute for Energy Economics and Financial Analysis, said the Indonesian government was hoping to take a larger share of revenues from coal.
“Not only will the HBA be used for setting royalties, they want it also to be used to set export prices.”
According to Peh, the industry is requesting a six-month grace period because the HBA often lags behind market conditions, noting that the delay is because the government aims to maximise revenue, which leads to keeping prices higher for longer.
“I think this is an example of sovereign countries trying to take more control of their resources, and that is just part of a wider geopolitical trend.”

Domestic impact?
Analysts expect the government’s new regulation to benefit domestic customers in the short term, particularly those who are reliant on cheap coal as it will have lower input costs.
“However, if the fixed pricing leads miners to prefer selling overseas or reduces overall production incentives, domestic users could eventually face supply shortages or higher black-market prices,” Zuhdi said.
There are more than 250 coal-fired power plants in Indonesia and more are being built to power industrial estates for the country’s lucrative mining sector to process commodities such as nickel and aluminium. This is despite Jakarta’s pledge to reach net-zero emissions by 2026.
Coal plants power 54 per cent of Indonesia’s current installed power capacity, which stands at about 90 gigawatts, data from the Energy and Mineral Resources Ministry shows. Thirty per cent comes from oil and gas and less than 15 per cent from renewables.
In 2022, the government banned the construction of new coal power plants but allowed certain exceptions. New plants can still be built for exclusive use at mineral processing sites and for projects deemed strategic to national interests.
Despite Indonesia’s vast renewable energy potential, coal remains the backbone of its energy mix, propped up by subsidies and the high costs of shifting to cleaner alternatives.
“In my opinion, if there are fewer buyers due to this regulation, it can be a good thing, because we do not have to produce as much,” Fabby said. “Because Indonesia’s current production is unsustainable.”
Additional reporting by Bloomberg


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Analysts warn Indonesia may lose its competitiveness over the new regulation amid concerns about lack of market flexibility


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Indonesia’s new coal pricing rule sparks uncertainty, resistance from Chinese firms

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Analysts warn Indonesia may lose its competitiveness over the new regulation amid concerns about lack of market flexibility

Analysts warn Indonesia may lose its competitiveness over the new regulation amid concerns about lack of market flexibility