Coal Prices Worsen as India Delivers Grim News for Indonesia

Jakarta, CNBC Indonesia - Coal prices have fallen further. In trading on Wednesday (24/6/2026), coal prices closed at US$129.05 per ton, a drop of 1.94%. Yesterday’s closing price was the lowest since 22 April 2026, or a two-month low. The weakening of coal prices was triggered by grim news from India. India will increase the use of domestic coal to more than 50% in power plants originally designed to use imported coal. Quoted from Reuters, this step was taken as the world’s second-largest thermal coal importer seeks to reduce expensive import costs. This Indian policy is bad news for Indonesia, a major supplier, as demand could fall. India has used domestic coal to operate 5.7 gigawatts (GW) of capacity out of a total of 18.7 GW of import-based power plants this year. Trials are currently underway to expand the use of domestic coal to an additional 4.3 GW of capacity. Import-based power plants have traditionally relied on supplies from Indonesia, South Africa, Russia, and other countries. Data from Indian coal trading firm iEnergy Natural Resources shows that coal imports from Indonesia and South Africa in the January-April period fell by around 21% and 68% respectively compared to the same period last year. Increased electricity production from renewable energy has eased the domestic coal supply, allowing more local coal to be diverted to coastal power plants that were previously built specifically to use imported coal. For years, India has sought to reduce coal imports for power plants. However, these efforts were hampered because import-based plants were designed to use higher quality coal and struggled to process lower quality domestic coal. A government official said plant operators have gradually modified generating units to be able to use more local coal with higher ash content. According to several sources, power companies are now blending imported and domestic coal to optimise operations, with some plants now using up to 70% domestic coal. “The Ministry of Coal has offered direct deliveries to import-based power plants, so that quality and quantity requirements can be met without obstacles,” said another official, quoted from Reuters. A third official said import-based power plants have ordered about 16 million metric tons of domestic coal to meet their needs. The three officials requested anonymity as they were not authorised to speak to the media. Grid-India data shows coal-fired electricity generation in India rose 10% in May compared to the same period last year, the highest growth since May 2024, as utility companies increased electricity production to meet demand. Meanwhile, commodity consultancy BigMint reported last week that India’s thermal coal imports in the January-May period fell to a four-year low of around 65 million metric tons, driven by increased domestic coal production and higher renewable energy generation. Sentiment in China’s coking coal market has also begun to deteriorate as market participants see domestic supply slowly recovering after mine closures due to an accident in Shanxi. However, prices have not fallen sharply because the market is still facing a shortage of high-quality coking coal, with production not yet returned to levels before the mine accident in late May. As of mid-June, around 63-64% of the closed mine capacity had resumed operations, but utilisation rates are estimated at only 70-80%, far below normal conditions which had previously exceeded 100%. Industry players estimate the premium coking coal supply deficit at around 20-30 million tons, prompting Chinese steel producers to continue increasing imports from Australia, Canada, and other suppliers. On the other hand, the outlook for steel demand remains weak, with steel mill profit margins under pressure, making buyers reluctant to make aggressive purchases and turning market sentiment negative. As a result of the tug-of-war between supply recovery and the shortage of high-quality coal, coking coal futures prices have tended to weaken from their peak in early June but have not yet experienced a widespread or prolonged decline.