SINGAPORE/JAKARTA — Indonesia’s coal producers are trapped between the rock of falling exports and a hard place of peaking demand from the nickel smelters that had been driving the fuel’s consumption domestically, creating a growth conundrum for the companies.
Coal is Indonesia’s biggest export earner, making $30.49 billion in 2024, and plunging revenues from the sector would have disproportionately bad effects on the country’s commodity-dependent economy, Southeast Asia’s biggest.
With lower profit margins leading to dropping share prices, coal’s woes point to a future of workforce cuts, slowing output and fewer contributions to government coffers at a time when President Prabowo Subianto is starting up ambitious spending plans.
Electricity-hungry smelters, most of which process nickel, have been the fastest growing demand source for Indonesian coal.
However, that demand will peak at 84.2 million tons by 2026 and fall to 78.6 million tons in 2027, according to the Indonesian Coal Miners Association (ICMA), because of nickel industry overcapacity and the potential implementation of stricter emissions regulations.
At the same time, Indonesian coal exports through June this year are down 12.6 percent from a year earlier by volume, data from Kpler showed, with government data showing the value of exports through May down 19.1 percent.
Exports to China, the country’s biggest coal buyer, fell by 30 percent from a year earlier in June, Chinese government data showed, as it relies on more domestic output and takes advantage of low prices to import higher quality coal from elsewhere.
“Indonesian coal miners are taking steps to diversify their business to hedge against a steeply falling demand for low- to mid-grade coal,” said Manish Gupta, senior analyst for Asia thermal coal research at Wood Mackenzie.
“We don’t expect the growth in captive (plant) addition from nickel smelting to continue going forward,” he said, using the industry jargon for power plants connected to nickel smelting sit es, known as captive plants.
