China and India, the two largest thermal coal importers in the world, are cutting back on Indonesian shipments in favor of more energy-dense grades imported from other countries. This is because a fall in global coal prices has made high-quality coals more competitive.

Industry officials report that China and India are shifting to higher-calorific coal (CV), which produces more energy per tonne.

"Higher CV coal costs more, but it produces more energy per dollar at the current price." "One million tons of higher-CV coal can replace as much as 1.2-1.3 or 1.5 million tons imported from Indonesia," Vasudev Pamnani said, Director at India-based coal traders I-Energy Natural Resources.

Analyst Zhiyuan Zhiyuan of Kpler said that in China, Indonesian thermal coals with low and medium calorific values are struggling to compete against cheaper Russian supplies.

Ramli Ahmad is the president director at the Indonesian miner Ombilin Energi. He said that Indonesian coal may make a return if the Middle East conflict causes prices to rise for higher grades. However, lower-CV coals will be affected as long as the more energy-dense grades remain competitive.

Chinese customs data and Indian trade data show that South African coal and Mongolian coal have both seen record gains in their respective markets during the first five months in 2025.

Xue Dingcui said that Mongolian coal is still competitively priced, despite the fact that thermal coal prices have fallen in China.

China and India also increased their purchases from Tanzania. Until the Russian war against Ukraine in 2022, Tanzania was absent from global seaborne coal trade maps.

In addition, Indian traders increased their purchases of higher-grade coal from Kazakhstan, Colombia, and Mozambique in this year. Australian supplies also gained share in China.

Since October 2023, the Australian benchmark has been declining faster than Indonesian, indicating that Chinese buyers prefer the higher grades of coal.

Looking Within

In the first five month of this year, Chinese coal imports dropped by nearly 10%, to 137.4 millions tons, and shipments to India fell more than 5%, to 74. million tons.

Indonesian exports were the hardest hit. Supplies to China and India fell 12.3% and 143% respectively. Data from Kpler revealed that the southeast Asian nation's coal exports fell 12% between January and May to 187 millions tons.

Indonesian miners have shifted their focus to domestic demand to counter the decline in exports. According to the Indonesian Mining Services Association, local deliveries are expected to increase by 3% this coming year, while exports will decline by about 10%.

According to data from the government, domestic demand is expected to reach 48.6%, which would be the highest level of coal production in Indonesia for at least 10 years.

Indonesia has set a price cap on coal sold to electricity utilities. This makes smelters an attractive alternative to exports.

Ahmad, an Ombilin employee, said that the smelter sector is currently the best for the company. We get higher prices from this industry than the power industry and sales to China.

(source: Reuters)