Indonesia's Coal Demand to Surge as Production Declines

Rising Domestic Consumption

Indonesia's domestic coal demand is set to reach 240 million tons in 2026, representing a significant increase in consumption. Hendra Sinadia, Chairman of the Indonesia Mining Association (IMA), highlighted that this growth in domestic demand is occurring against a backdrop of declining national coal production.

Production Challenges

The country's coal production is expected to decline to 700 million tons by the end of 2025, down from 836 million tons in the previous year. This reduction in production capacity is creating pressure on suppliers to meet the growing domestic demand while managing overall production constraints.

Policy Considerations

In response to these market dynamics, IMA is calling for a comprehensive review of the Domestic Market Obligation (DMO) policy. The current DMO requires coal producers to sell a certain percentage of their production to the domestic market. Hendra Sinadia suggested that the DMO percentage may need to be adjusted to accommodate the rising domestic demand, potentially exceeding the current 25% threshold of total production.

Market Implications

The combination of increasing domestic demand and decreasing production levels creates a complex scenario for Indonesia's coal industry. While the rising DMO could support domestic energy needs, it may also challenge producers who are already operating below previous production levels. The situation underscores the need for careful policy consideration to balance domestic energy requirements with industry capabilities.