COAL OUTLOOK
South Africa’s thermal coal export industry is estimated at US$5bn.
Thermal Coal’s ‘face-off’: Indonesia vs China By Tom Price Managing Director, Research Analyst, Resources at Panmure Liberum Right now, the outlook for South Africa’s long-US$5bn, 60 mtpa thermal coal export industry – source of 5% of the global trade – depends heavily on the outcome of an evolving point of mostly supply-side conflict between Indonesia and China.
W hat’s going on? Indonesia – source of 45% of the 1 btpa globally traded thermal coal – continues to dramatically ‘chop and change’ its core strategy to boost the prices and tax returns of its massive 0.5 btpa export industry. Meanwhile, China – biggest buyer of Indonesia’s coal – is pushing back on these price-hiking strategies, by periodically marginalising the trade flow with its own locally mined coal, source of a staggeringly large 4.8 btpa raw coal. This odd coal market ‘face-off’ has effectively dragged on global product prices for over a year now – to the frustration of Indonesia’s rent-seeking government. Here, we explain the state-of-play for the Indonesia-China coal trade, and list possible outcomes for global thermal coal supply and prices. A massive cut Last December, the head of Indonesia’s Ministry of Energy and Mineral Resources, Bahlil Lahadalia, announced a general plan to cut the national coal output target rate for 2026 to below 2025’s rate. The policy’s objective? To support product prices across the industry; stabilise government revenues; improve industry’s environmental standards.
In this New Year, Lahadalia provided the market with some numbers too: 2026’s maximum total coal output would be set at 600 mt, 25% below 2025’s total of 790 mt. Note, of 2025’s 790 mt of total production, we estimate that 488 mt was exported as thermal coal; 23 mt was exported as metallurgical coal. As this article was being written, there had still been no details shared by the government on how this cut was to be applied (e.g. by mine, province, grade, exports, etc.). Unsurprisingly, various industry entities of Indonesia have begun lobbying the government for policy exemptions. Potential impact, measured Pre-cut, for 2026, we forecast Indonesia’s thermal coal exports at 493 mt (+1%YoY), 45% of the corresponding forecast global total – making Indonesia the largest source of exported thermal coal. Assuming the Ministry’s 25% cut to Indonesia’s total coal output rate reports entirely to the industry’s exports too, then this policy would reduce our 2026 forecast total for the country from 493 mt to just 370 mt (assumes too, that all else in industry and markets remains unchanged) – removing 123 mt, or 11%, from 2026’s 1 091 mt global thermal coal trade. A cut of this size
10 MODERN MINING www.modernminingmagazine.co.za | March 2026
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