CHINA NEED INDONESIA COAL

S&P Global - October 06, 2025 - Chinese buyers have begun preliminary negotiations with Indonesian suppliers for 2026 thermal coal deliveries but are opting for shorter-duration contracts, some as brief as a quarter, rather than traditional annual deals.

Market participants say the move reflects a cautious procurement strategy as seaborne thermal coal prices remain rangebound and are unlikely to see significant upside next year, prompting Chinese buyers to prioritize flexibility over long-term price commitments.

The negotiations, first heard at the Coaltrans conference at Bali in late September, are still continuing, and while Chinese buyers are asking for fixed-price deals, Indonesian miners are pushing for longer-term contracts and also more flexibility in prices, sources told Platts.

China, which accounts for around 40% of Indonesia's thermal coal exports at around 150 million mt/year, is a major price setter in the seaborne market, and domestic prices are often influenced by import prices.

China Shenhua Energy and Zhejiang Energy Group, two large integrated coal and power companies that were heard to have been negotiating quarterly contracts for H1 2026, did not respond to queries, while Guangdong Energy Group could not be reached immediately. China Shenhua Energy is a subsidiary of China Energy Investment Corporation, or CHN Energy.

"Miners would naturally want a certain percentage of their annual output tied to long-term contracts as it has always been, but this time, dynamics are slightly different, caused by a general oversupply situation in Asia," a source at Indonesia's largest miner Bumi Resources said.

With freight rates holding steady and demand expected to remain seasonally moderate, Chinese buyers appear focused on securing better deals rather than volume, suggesting that 2026 coal contracting activity may remain cautious and fragmented through the first half of the year.

Prices key to contractual negotiations

Asian thermal coal seaborne prices have largely remained rangebound over the last six months, owing to rising domestic production in the two largest buyers, India and China, and higher production than demand. The FOB Kalimantan 4,200 kcal/kg GAR, the most liquid grade of thermal coal, was assessed by Platts at $43.65/mt on Oct. 6, down from around $46/mt in May. Year-over-year, the price is around 18% lower.

Both China and India saw record-high coal production in 2024 at 4.5 billion mt and 1.1 billion mt, respectively, while Indonesian coal exports also hit the highest-ever level at 550 million mt. Indonesia's domestic production also touched a high of 836 million mt last year, but in H1 2025, exports fell 9% year over year despite miners maintaining regular production levels.

"Current prices are at levels where many miners are still making some marginal profits, but below these, margins will really be squeezed. Our negotiations with Chinese buyers are also keeping in mind current supply dynamics and how we can ensure a healthy market environment," another Indonesian miner said.

Traders said China was also heard to have initiated talks with Russian suppliers for deliveries over the January-March 2026 quarter. Russia continues to be a key supplier of higher-calorific-value coal to Chinese utilities, offering competitive prices despite ongoing sanctions-related trade hurdles.

"The interest in Russian cargoes is also to diversify its sourcing while retaining leverage in price discussions with Indonesian miners," a China-based trader said.

Market participants noted that logistical disruptions in Australia, another major high-CV coal exporter to China, have tightened spot availability and extended delivery timelines, prompting Chinese buyers to hedge supply risk through multiple origins.

-----