Indonesia’s efforts to implement a government-regulated price for coal, known as the HBA, are not gaining traction with major buyer China. This situation poses a challenge for Jakarta as it aims to gain more control over its commodity exports. The HBA was introduced on March 1 to establish greater national oversight on the pricing of both domestic and export transactions for coal, which is a crucial resource for Indonesia.
Despite nearly two months of the new pricing system, most Chinese buyers continue to rely on the old Indonesian Coal Index (ICI) for pricing. Traders have expressed concerns that the HBA is less transparent, updated less frequently, and ultimately results in higher costs. The Indonesian Coal Mining Association indicated that many exporters are not adopting the HBA, as buyers are more accustomed to the ICI system.
Julian Ambassadur, a director in Indonesia’s Energy and Mineral Resources Ministry, stated that the ministry is evaluating the situation but did not disclose specifics regarding the HBA’s lukewarm reception. As the leading thermal coal exporter globally, Indonesia finds it challenging to assert influence over its coal prices, particularly given that its coal exports to China were valued at approximately $17.2 billion last year. The new pricing policy was intended for spot trades starting in March, while ongoing long-term contracts based on the ICI would still be honored.
Nevertheless, concerns have emerged that the elevated HBA prices may deter buyers, leading to potential sanctions against investment in Indonesia’s mining sector. In addition, a decrease in demand from China and India has weakened Indonesia’s bargaining position. With China’s coal imports falling 6% year-on-year in March and major players like China Shenhua Energy halting purchases, analysts predict further declines in coal imports this year, which could further impact Indonesia’s economic standing in the global coal market.