Indonesia, the world's largest exporter of thermal coal, has recently rolled out a sweeping set of new export and financial regulations that could have some impact on both domestic producers and global buyers.

Driven by fiscal imperatives and an evolving international energy market, the measures, set to take effect in 2026, aim to tighten control over resource revenues and boost foreign reserves.

Finance Minister Purbaya Yudhi Sadewa announced government plans to impose levies for coal exports ranging 1-5%, depending on coal grade. The tax is estimated to generate an additional 20 trillion rupiah ($1.2 billion) annually for the nation.

The duties will only apply when coal prices are high, a mechanism designed to avoid overburdening miners during downturns, yet it also injects significant uncertainty into long-term planning and financial forecasting for the industry.

In tandem, the government has tightened foreign exchange retention rules for resource exporters. The latest revision of the earnings retention rules was last updated in February 2025.

From January 1, 2026, all export proceeds from natural resources must be deposited in state-owned banks, including private lenders, for a minimum of one year. The proceeds could be used for business operations if converted into rupiah.

Nevertheless, only 50% of the foreign currency earnings will be convertible into rupiah to fund domestic operations under the new regulation, down from 100% under the previous regulation, compelling companies to hold a larger share of their revenues in foreign currency.

Though firms are permitted to use these funds to purchase government bonds denominated in foreign currencies, the regulation marks a clear effort to centralize foreign exchange management and steer financial flows toward national priorities.

Producers are already contending with rising logistics costs, stemming from higher coal and mineral royalties and the B40 mandates. The new export levies would further suppress profits that have been squeezed by falling global coal prices, while increasing operational costs.

Major importers such as China and India have ramped up domestic production, while renewable energy continues to erode coal's share in the energy mix. As a result, Indonesian coal exports have contracted notably. From January to October 2025, total exports fell by 7.48% year on year to 428 million tonnes, with shipments to China and India down 16.53% and 7.43%, respectively.

Although Indonesian exporters have tried to pivot towards Southeast Asian markets, the shortfall has been difficult to bridge.

The weakening global demand has prompted the government to revise down its production targets. After hitting a record high of 836 million tonnes in 2024, output is projected to drop to 735 million tonnes in 2025 and fall below 700 million tonnes in 2026.

Compounding the problem is Indonesia's Domestic Market Obligation (DMO) policy, which mandates that coal producers sell to domestic power utilities, especially state-run ones, at capped prices. Given rising production costs, private miners in particular are increasingly reluctant to prioritize the domestic market.

Inevitably, squeezed margins and escalating costs may push exporters to pass on the burden to overseas buyers, potentially eroding Indonesian cargo's price competitiveness. Some buyers may pivot away from Indonesian low-CV coal, long valued for its lower costs, towards higher-CV Australian or Russian resources, undermining Indonesia's share in the global market.

In March 2025, the government mandated that coal be sold at or above government-set lowest prices of HPB, only to scrap the rule in August amid global price volatility and mounting downward price pressure.

Additionally, the Ministry of Energy and Mineral Resources announced a change in the mining work and budget plans (RKAB) in October, reducing the submission period from three years to one year. Even companies that have already secured mining production quotas for 2026 must resubmit their plans for fresh approval.

Officials argued this will give the government greater agility to respond to market fluctuations and fiscal needs, yet it may also bring disruptions to an industry that relies on mid- to long-term planning for capital-intensive operations.

Any fluctuation in Indonesian coal supply reverberates across Asia-Pacific energy markets, where many economies still rely heavily on imported thermal coal. The new export duties may prompt international buyers to re-evaluate long-term contracts or seek alternative supply routes against a backdrop of broader coal demand weakness worldwide and a price-sensitive market.

Nevertheless, rising costs and stricter regulations could constrain the release of marginal production capacity domestically, which could in turn lend certain support to global coal prices.

More generally, the strategy reflects a growing global consensus among resource-rich nations to exert stronger control over strategic commodities and extract their maximum value in the co-existence of energy transition and fiscal pressures.