Indonesia Coal: Resurging fuel cost burden but limited coal price upside this time

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Indonesia Coal: Resurging fuel cost burden but limited coal price upside this time

n is expected by August, following the July application window for

revisions. The move would increase seaborne coal supply in the second half of

2026, adding pressure on Indonesian coal prices. We see the government’s

willingness to revise the RKAB as a proactive step to prevent mass layoffs in

the mining sector, mirroring its earlier $13/mmbtu gas price cap for domestic

industries to protect manufacturing jobs. As a result, we expect higher coal

output to weigh on prices, reinforcing our cautious outlook for the sector.

• Tight EU gas storage, but impact on coal price likely limited this time.

Europe’s gas storage level is near its historical low, currently at 54% vs. an 80%

target by November ahead of the winter season (Figure 21Totalnaturalgasstoragelevel). Asian buyers are

competing for LNG cargoes due to disruptions in the Strait of Hormuz, which

has pushed TTF gas prices up by around 40% month-to-date and triggered

some gas-to-coal switching in the EU. Despite these shifts, we expect only a

limited impact on Indonesian coal prices. Ample coal inventories relative to the

2021-22 levels (Figure 7EUcoalinventoriesvs.coalpricebenchmarks) and strong growth in renewable generation—solar

and wind have driven a 13% year-to-date increase in EU power output—are

likely to cap any significant upside for coal demand. As a result, we see the

current gas market tightness as a muted catalyst for coal prices this season.

• Coal inventories remain ample across key markets. Industry feedback from

our Australian coal analyst, Jonathon Sharp, points to transactions occurring

below the spot Newcastle price, reflecting comfortable inventory levels among

buyers.