No Country for Old Coal China and India, the world’s largest thermal coal importers, are significantly reducing purchases from Indonesia in favour of higher-grade coal from alternative suppliers. As global prices fall and domestic production rises, especially in China, shifting trade dynamics are reshaping energy markets and bringing notable implications for Indonesia and global coal shipping routes.
China and India, the world’s top importers of thermal coal, are significantly cutting back on purchases from Indonesia in favour of higher-calorific value (CV) coal from countries like Russia, Mongolia, South Africa, and Australia. A global drop in coal prices has made energy[1]dense grades more competitive, as they produce more energy per T and offer better value, despite their higher cost. For example, 1 Mn T of high-CV coal can replace 1.2 to 1.5 Mn T of lower-grade Indonesian coal.
China’s imports of Indonesian coal fell by 21 per cent, while shipments from Mongolia and Australia rose. In India, imports from South Africa surged by 26 per cent, while those from Indonesia declined 14 per cent. Both nations are also increasing coal imports from Tanzania, Kazakhstan, Colombia, and Mozambique. China is favouring discounted Russian coal, while Indian traders are seeking more efficient, energy-rich alternatives.
As demand weakens, Indonesia’s total coal exports fell 12 per cent to 187 Mn T between January and May 2025. To mitigate the impact, Indonesian miners are shifting their focus to the domestic market, especially to the nickel smelting industry. Domestic coal deliveries are expected to rise by 3 per cent this year, with domestic demand now accounting for 49 per cent of total supply, the highest share in a decade. Since coal prices are capped for power utilities, industrial buyers like smelters offer more profitable returns.
As a result, Indonesia is increasingly relying on internal demand, especially from unregulated industrial sectors, to offset declining exports. Coal contributes around 3.6 per cent to Indonesia’s economy and provides tens of thousands of jobs. Yet, exports are weakening, hitting a three-year low between January and April 2025. Domestic regulations, such as mandatory supply quotas and high royalties, along with limited access to global financing, continue to constrain profitability. Furthermore, around 75 per cent of coal company shares are controlled by insiders, limiting transparency and broader investor participation. Indonesia’s coal policy is full of contradictions. While the government has pledged to cut emissions and transition to clean energy, including plans to retire coal plants early, it continues to expand coal output and approve new facilities. Domestic subsidies keep prices low, but abrupt export bans disrupt global markets. Without a clear and coordinated shift to renewables, there is long-term uncertainty for its coal sector.
Meanwhile, China is increasingly relying on domestic coal production to meet its energy needs, reducing its dependence on imported coal, volumes of which were down 22 per cent y-o-y in the first five months of the year. In 2024, China produced 4.7 Bn T of coal, and output rose another 6.6 per cent y-o-y in the first four months of 2025, reaching 1.58 Bn T. April alone saw 389 Mn T produced, 3.8 per cent more than the same period last year. Officials project domestic output to grow by another 70 to 80 Mn T in 2025, with production expected to peak only around 2027. This strong domestic supply base enables China to prioritise energy security while gradually scaling down imports.
Despite a rise in coal-fired power plant approvals in response to past energy shortages, thermal power output declined by 4 per cent in early 2025, as renewables play a growing role. Wind and solar now provide 26 per cent of China’s electricity, while coal’s share fell to a record low of 54 per cent in April. The government is carefully balancing its energy security needs with climate commitments, using abundant local coal as a buffer while steadily expanding cleaner energy sources across the national grid.
For shipping, the shift in trade flows from Indonesia to China to South Africa/Australia to China is a boost in tonne-miles; however, flows from Mongolia would counter that as most of that trade is not seaborne. Similarly, India importing more coal from Colombia, Mozambique and Tanzania would boost tonne-miles.
