Indonesian coal miners have reportedly suspended spot exports, as one of the defensive measures against uncertainties over the government's proposed sharp reductions in production quotas for 2026.

Cuts to approved production quotas vary widely, ranging from 25% to as high as 70-80% for some major miners compared with their submitted volume, despite many having fulfilled or exceeded their 2025 domestic market obligations (DMO), local sources confirmed.

Some large producers have reportedly paused spot sales to buyers, mainly in Asian countries, but kept fulfilling existing long-term contractual commitments, while monitoring the future policy changes and demand dynamics.

Sources said long-term contracts account for roughly 65% of Indonesian mine sales, while spot contracts represent about 35%. Buyers with spot contracts are mainly traders and small-to-medium power plants.

While acknowledging difficulties in securing spot tonnages, several local sources told Sxcoal that the halts are not 100% or widespread and it still needs time to observe the actual impact.

One mining source noted lacklustre demand from China and India, especially as China is soon to celebrate the Chinese New Year, a time of low demand as factories shut and activities slow across the country.

The suspensions stem from reluctance to commit volumes amid fears that enforced lower output could lead to shortfalls or penalties. Some local participants warned of the possibility that spot shipments are unlikely to resume in the current quarter unless the government revises its stance. 

The government's rationale for the dramatic output cut centers on rebalancing global oversupply to support prices, which have weakened due to softer demand from key importers China and India.

While the whole-year work plan and budget (RKAB) for coal miners has yet to be determined, Energy Minister Bahlil Lahadalia stated in early January that production will be reduced to around 600 million tonnes in 2026, marking a sharp decline of 24% from 2025's realized output of about 790 million tonnes.

Of the total, 32% or so was allocated to the domestic market, while roughly 65.1% was for exports last year. Indonesia mainly exports thermal coal, with lower-grade grades making up most of the sales.

For miners that have yet to receive an approval, they may operate in line with a transitional policy rolled out by the energy ministry late last year, which allows production of up to 25% of prior approved quotas under the previous three-year mechanism, through March 31, 2026, to avoid immediate shutdowns.

Sxcoal projected earlier, based on the 600-million-tonne production target and a conservative DMO share of 30-35%, indicates that exportable volumes in 2026 would likely fall within a range of 390-420 million tonnes. That represents an 18-24% fall from the already reduced 2025 export level. 

If domestic needs intensify, there is a likelihood that the DMO share could be raised, pushing exports below 400 million tonnes of threshold as Indonesia prioritizes domestic needs.

Industry pushback intensifies

The Indonesian Coal Mining Association (ICMA), representing producers accounting for a majority of national output, has formally objected to the cuts, warning of severe risks including mine closures, mass layoffs, loan defaults, and disruptions to supporting sectors such as logistics and heavy equipment financing.

Analysts and traders remain divided on the outcome. Many expect eventual backtracking or upward revisions. History shows Indonesia often relaxes or walks back strict export or production restrictions when faced with economic pushback or resistance.

This concern has partly contributed to the ongoing muted buying interest and limited precautionary stockpiling. Sxcoal learned that major Chinese end users and traders remained cautious about building up stocks of Indonesian coal, with limited buying despite ongoing tight availability of Indonesian cargoes. Major power plants have already secured sufficient stocks ahead of the Chinese New Year holiday.

However, if the around 600-million-tonne cap holds firm, a significant global supply squeeze could emerge in the following several months, potentially driving sharp price increases. Lower-CV thermal coal, particularly, could soar by over 40% under this scenario, some participants reckoned.

As of February 3, the CCI index for Indonesian 3,800 Kcal/kg NAR coal stood at $49/t FOB, rising 10% from the late-December trough of $44.5/t.

Some Asian buyers, reliant on Indonesia as the world's top thermal coal exporter, are already exploring alternatives from Russia, South Africa, Mozambique, and other sources.

As discussions continue between the ministry and industry, the coming weeks will be critical in determining whether the cuts are enforced or moderated, some traders warned, temporarily adopting a wait-and-see mode.