Indonesia’s coal sector is expected to meet the government’s 2025 production target despite a significant drop from last year’s output, according to the Indonesian Coal Mining Association (APBI).

Addressing the Aspebindo Energy Executive Forum on Monday, November 17, 2025, acting APBI executive director Gita Mahyarani said national coal production had reached nearly 90 percent of the government’s 739 million ton target as of October.

“Last year’s production reached more than 830 million tons, so we will not surpass that. But with production already at 90 percent, we expect this year’s target to be fully achieved,” Gita said.

Regardless of positive projection, the industry, however,warns that declining targets, potential production cuts, and rising costs particularly from new fuel requirements pose mounting challenges.

Gita noted that the government’s production target has been declining over the past few years, in line with market conditions and environmental commitments. She revealed that APBI had also heard discussions within the government about potential production cuts, though details remain unclear.

“We are still waiting to see what the mechanism and system will look like,” she said, while adding that the ongoing approval process for mining work plans (RKAB) at the Energy and Mineral Resources Ministry could influence the policy.

Any reduction in output, she cited, would have an impact on producers. But the government is also seeking ways to stabilize prices amid global oversupply, which has pushed coal prices down throughout the year.

Despite that, she stressed that Indonesia is not a market controller.

“Even if Indonesia cuts production, it does not automatically influence global prices,” she said. “Major players, such as China and India, still dominate the market. China alone produces up to 4 billion tons annually”.

Domestic demand

Domestic coal demand or DMO (domestic market obligation) is projected to reach 239.6 million tons next year, with the power sector accounting for more than half of consumption. The remainder is allocated to smelters, fertilizer producers, and other industries.

Gita highlighted long standing industry concerns about the DMO price policy, which has not been revised for nearly eight years despite rising production costs.

“From 2018 until today, costs have continued to increase, while mines are getting older and stripping ratios become more challenging. It is time to review the DMO pricing policy,” she said.

Although regulations require miners to allocate 25 percent of output to the domestic market, actual DMO fulfillment has exceeded 27 percent in the past two to three years.

“Not all producers are able to comply. Some coal specifications do not meet PLN’s requirements, while others face economic constraints,” Gita said, while referring to the requisite set by the State power utility PT PLN.

SEA offers growth

On the export front, the industry expects demand to continue being driven by China and India, despite signs of tapering consumption.

Southeast Asia, including Malaysia and Vietnam, remains a promising market, particularly as several coal-fired power plants are expected to operate until 2030.

“But these markets cannot substitute Indonesia’s exports to China. Diversification is ongoing, but global supply-demand dynamics still determine export performance,” she stressed.

Among the industry’s most pressing challenges this year is the mandatory adoption of B40 biodiesel, whose subsidy has been removed. “Mining equipment uses about 50 percent B40 fuel, so the cost burden is significant without subsidies,” Gita said.

She warned that if production costs continue to rise without adjustments in domestic pricing or regulatory flexibility, smaller miners may struggle to survive.