(Nov 10): Chinese coal buyers are pushing back against attempts by some Indonesian miners to rewrite 2027 supply contracts in ways that would shift the risk of government-driven disruptions onto customers, threatening to delay deals that underpin decisions on output.
Some Indonesian producers are seeking waiver clauses that would release them from obligations to deliver contracted volumes if Jakarta cuts output quotas or delays export approvals, according to people with knowledge of the matter. Chinese buyers are reluctant to accept such provisions, particularly after changes in government policy contributed to disruptions in deliveries this year, said the people, asking not to be named discussing confidential contract terms.
Indonesia, the world’s biggest exporter of thermal coal, is exerting greater control over output and exports of the fossil fuel to safeguard supplies for domestic power production. Miners must meet local obligations before they can go ahead with overseas sales while the government is also routing exports through state-controlled channels to improve pricing transparency and curb practices such as under-invoicing.
As a result, Indonesian coal exports to China are down almost 10% in the first 10 months from a year earlier, according to data from Kpler. That’s even as overall production is forecast to be around 720 million tonnes this year, ahead of the government’s initial target of 600 million tonnes.
The changes in Indonesia, under the so-called RKAB work plan and budget system that seeks to control mining production volumes, are complicating negotiations with customers.
Some Chinese traders are delaying annual contract talks as they wait for greater clarity on Jakarta’s production target and the allocation of individual mining quotas, according to analysts who cover the sector, asking not to be named due to the sensitivity of the matter. Further delays could mean that producers enter the new year without certainty over how much coal they are authorised to mine.
The policy shifts may be more disruptive for contracts with overseas customers than production. Indonesia will probably keep output at about 700 million tonnes next year, so an export supply squeeze is unlikely, said Glen Kurokawa, an analyst at CRU Group.
Delayed contracts and broad waiver clauses could leave individual Chinese buyers uncertain whether nominated supplies will be delivered, however. That could increase their exposure to spot-price volatility and potentially push demand toward Indonesia’s competitors including Australia and Mongolia.
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