Indonesia’s attempt to redirect coal exports to Southeast Asia will do little to offset shrinking demand from China, its largest buyer, said a new report by the Energy Shift Institute (ESI).

The study, titled “Indonesia’s coal exports: Courting Southeast Asia is a stop-gap measure,” warns that the strategy provides only temporary relief while exposing Indonesia to growing competition from Australia, Russia and South Africa, who are also eyeing the region.

The report comes amid intensifying global pressure to phase down coal and rising investment in clean energy, signaling a challenging future for Indonesia’s coal-dependent regions unless long-term transition planning accelerates.

The report argues that although diverting supply to ASEAN markets helps maintain short-term revenue flows, it is unlikely to compensate for China’s rapidly declining import volumes.

Data compiled by Intracen and ESI show that Indonesia shipped 84 million tons of coal to China in the first half of 2025, a 21 percent decline from the same period last year.

By contrast, total exports to four key Southeast Asian markets amounted to 55 million tons, far below the scale needed to offset lost Chinese demand.

“A reduction of 23 million tons in Chinese imports from Indonesia just from the same period in 2024 is equivalent to 43 percent of Indonesia’s total exports to the four ASEAN countries. This underscores China’s unmatched coal consumption and energy system,” ESI’s Coal Transition Lead, Hazel Ilango, said on Monday, December 1, 2025.

The report highlights the structural limitations of the regional market. Combined additional coal demand for power generation in Indonesia, Vietnam, the Philippines, Thailandand Malaysia totals less than 25 gigawatts (GW). In contrast, China’s potential increase in coal-fired power generation needs reaches 484 GW, underscoring a vast gap in market scale.

Moreover, policy direction across ASEAN increasingly favorsdiversification away from coal. Many countries have begun shifting toward renewable energy and natural gas as part of their climate commitments. Vietnam, for instance, has halted inefficient coal plants and restricted new coal-based projects entirely.

Domestic market

While Indonesia’s domestic coal demand is projected to grow by around 14 million tons (6 percent) in 2025, most producers remain reluctant to divert exports to the local market. Analysts note that the Domestic Market Obligation (DMO) policy which caps coal prices for certain buyers, particularly state utilities, makes the domestic market financially unattractive for private miners.

Hazel warned that without a broader economic diversification strategy, Indonesia risks a steady erosion of export revenue as global coal consumption declines.

“ASEAN’s temporary gains should be leveraged as capital for transitioning into more sustainable economic activities from clean energy development to building transition-support infrastructure or diversifying industries in coal-producing regions,” she said.

“Without such adaptation, the short-term advantage of ASEAN markets will merely delay structural decline, leaving Indonesia vulnerable to revenue shocks and the shrinking global coal market,” she added.