The Energy and Mineral Resources Ministry is set to mandate the use of the country’s benchmark coal price (HBA) in export transactions, a move welcomed by the Indonesian Energy, Mineral, and Coal Suppliers Association (Aspebindo). The association also urged the government to establish a green coal price index, Indonesia Green Coal Index (IGCI), to reflect sustainability factors in pricing.

Aspebindo Deputy Chairman Fathul Nugroho said adopting HBA as the reference price for exports would enhance Indonesia’s 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 on Wednesday.

Currently, coal exporters refer to the Indonesia Coal Index (ICI) in pricing transactions, while royalty payments are based on the government-issued HBA. The proposed policy would require international sales to align with HBA, reducing discrepancies between royalty payments and actual sales prices.

Fathul added that HBA pricing remains competitive with ICI, minimizing risks for exporters. However, he suggested updating the HBA weekly instead of monthly to align with fluctuating production costs and global coal prices.

In addition to endorsing the mandatory use of HBA, Aspebindo urged the government to introduce the Indonesia Green Coal Index (IGCI), incorporating sustainability factors such as carbon taxes into the pricing model.

“A green benchmark price would account for royalties, carbon taxes, and average FOB prices of major mining companies. This would encourage environmentally responsible coal mining while ensuring the industry’s long-term sustainability,” Fathul added.

Export Growth Amid Price Declines

Indonesia’s coal export volume rose 5.67 percent year-on-year (YoY) in October 2024 to 51.6 million tons, driven by increased winter demand in the Northern Hemisphere. However, the total export value dropped 2.08 percent year on year to USD 3.29 billion due to declining global coal prices amid higher supply.

China emerged as the largest driver of Indonesia’s coal export growth, with shipments surging 41.45 percent year on year in October 2024 to 26.42 million tons. The spike was fueled by increased power demand ahead of winter and heightened safety inspections at Chinese mines following a rise in coal mining accidents.

Bank Mandiri’s economic research team expects Indonesia’s coal export growth to slow in 2024 due to rising global supply and efforts by major importers like China and India to curb imports. Nevertheless, global coal prices are projected to remain elevated in the coming years, supporting Indonesia’s coal industry.

The average coal price for 2024 is forecast to decline to $117 per ton before slightly easing to USD 110 per ton in 2025.