Top thermal coal importers China and India are significantly reducing their purchases from Indonesia, the world’s largest coal exporter, in favour of higher-energy coal from alternative sources. This strategic shift comes as a global decline in prices has made more energy-dense coal grades economically attractive.
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Industry officials say that while high-calorific value (CV) coal is more expensive, it produces more energy per dollar spent. “Higher CV coal is more expensive, but produces more energy for every dollar spent at current prices. One million tons of higher CV coal can replace 1.2-1.3 million tonnes or even 1.5 million tonnes from Indonesia,” said Vasudev Pamnani, director at India-based coal trader I-Energy Natural Resources.
In China, Indonesian medium and low-calorific thermal coal is struggling to compete with discounted Russian supplies of similar grades, according to Kpler analyst Zhiyuan Li. Meanwhile, Ramli Ahmad, president director of Indonesian miner Ombilin Energi, noted that Indonesian coal could make a comeback if prices of higher grades rise due to the Middle East conflict, but lower CV coal will suffer as long as more energy-dense grades are competitive.
The biggest beneficiaries of this shift have been Mongolia and South Africa, with Mongolian coal gaining market share in China and South African coal rising in India. Chinese customs and Indian trade data show that their shares reached record highs in the first five months of 2025.
“Mongolian coal has remained price-competitive,” said Xue Dingcui, analyst at Mysteel. He added that higher production and improved efficiency will continue to support Mongolia’s exports despite falling coal prices in China.
Both China and India have also increased coal imports from Tanzania, an emerging player in the seaborne coal trade since the onset of the Russia-Ukraine conflict in 2022. Indian traders have diversified further, sourcing high-grade coal from Kazakhstan, Colombia and Mozambique, while China has ramped up purchases from Australia.
Price trends reflect this shift, with both Indonesian and Australian coal indexes, key benchmarks for Chinese buyers, falling since October 2023. However, the Australian benchmark has declined at a faster rate than its Indonesian counterpart.
Overall, China’s coal imports fell nearly 10 per cent to 137.4 million tons from January to May 2025, while India’s dropped more than 5 per cent to 74 million tons. Indonesian exports took the largest hit, with shipments to China down 12.3 per cent and to India by 14.3 per cent. Indonesia’s total coal exports declined 12 per cent to 187 million tons during the same period, according to analytics firm Kpler.
In response to falling exports, Indonesian miners are increasingly targeting the domestic market, particularly nickel smelters. The Indonesian Mining Services Association projects a 3 per cent rise in domestic deliveries this year, with exports expected to drop by about 10 per cent.
Domestic coal demand is set to account for the highest share of Indonesia’s coal output in at least a decade, reaching 48.6 per cent, according to government data reviewed by Reuters. Smelters have become a preferred customer due to better pricing than what is offered by the power sector or international buyers like China.
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