Indonesia’s coal conundrum: Lower HBA prices fail to ignite thermal coal interest

Uncertainties clouded trading activities in the coal market in March following the implementation of a new pricing regulation in Indonesia, one of the largest thermal coal exporters in the world.

When Indonesia mandated coal exports to be priced based on the government benchmark known as the Harga Batubara Acuan, or HBA, starting March 1, the market resisted, citing unclear implementation guidelines and elevated benchmark prices.

Following the backlash, the government clarified a week later that while thermal coal miners could export at any price, the taxes and royalties paid to the government would be based on either the HBA or the selling price, whichever is higher.

The HBA is the basis for determining Indonesian coal product prices and the royalty producers must pay for each metric ton of coal sold overseas. Spot and long-term contracts previously used indices from independent price reporting agencies, including Platts, part of S&P Global Commodity Insights.

The government updated its HBA methodology in 2023, with prices announced on the 1st and 15th of each month.

The HBA comprises the prices of four grades of Indonesian thermal coal: 3,400 kcal/kg GAR, 4,100 kcal/kg GAR, 5,300 kcal/kg GAR, and 6,322 kcal/kg GAR.

Miners producing higher or lower grades normalize their values based on the closest index published by the government and derive their obligation, known as the Harga Batubara Benchmark, or HPB. HPB is the lowest price at which cargo can be sold based on its calorific value, volume, and other specifications, including moisture, ash and sulfur.

Indonesian government officials had previously noted on different occasions that the country's natural resources were undervalued in the global market, emphasizing that, as the world's largest coal exporter, the country should have the authority to set prices.

"Why should our coal prices be dictated by neighboring countries?" Bahlil Lahadalia, Indonesia's energy and mineral resources minister, said in February. "Our nation must have sovereignty in determining the quality and pricing of its own resources."

Officials have said that mandating exporters to base their shipments on HBA prices would lead to more favorable pricing for Indonesian coal.

According to S&P Global Commodities at Sea(opens in a new tab) data, Indonesia exported 40.80 million mt of thermal coal in February 2025, compared to 43.5 million mt in February 2024.

"The HBA's reaction is delayed compared to spot market prices, so it takes time to align," said Commodity Insights Senior Analyst Pat See Khoo. "Introducing the HBA pricing in the current downtrend market is benefiting alternative suppliers to gain market share."

Here are the key developments following Indonesia's implementation of the HBA regulation on March 1:

• The week of March 3-7 saw limited trades as market participants were uncertain about signing deals amid the disparity in HBA and prevailing market prices for several coal grades. Miners refused to offer while buyers stayed on the sidelines, leading to no bids or negotiations.
• While the March 1 HBA was higher, ranging from $2.80-$12/mt FOB, for low-mid calorific value grades compared to the respective indices published by Platts, the March 15 HBA prices of the four grades mentioned above were lower, narrowing the gap. Indonesia also allowed miners to sell at prices other than HBA.

• The announcement of HBA prices on March 15 for the latter half of the month was notably lower and aligned more closely with market prices, encouraging buyers to finally consider the benchmark pricing.
• Miners started offering after the rule relaxation and bids also followed, but the gap in bid-offer range discouraged deals in a market that largely remains oversupplied amid poor demand.
• Demand from major consumers such as India and China remains weak, influenced by increasing portside stocks and more competitive coal-sourcing options. Rising freight costs add to the uncertainty, making stakeholders hesitant to commit to the position despite the approaching end of the Ramadan holidays, which are expected to limit cargo offerings as many market participants remain absent.
• Despite a reduction in government prices and a slight easing of selling prices, the market continued to experience limited inquiries from major consumers, particularly from India and China, in the week of March 17. Rising freight rates further dissuaded Indian and Chinese buyers from importing cargo.
• Pockets of demand were heard in the week of March 17 for low CV cargoes, mainly 3,400 kcal/kg GAR and 4,200 kcal/kg GAR from China for blending purposes.
• Lower demand led many suppliers to offer cargoes at flat to HPB prices derived after normalizing the cargo's calorific value, sulfur, ash and moisture content.
• Traders holding position tried to offload stocks at lower than HBA-linked prices.
• Small miners accepted paying higher company taxes based on the HBA to sell cargoes at lower than the HPB price to meet buyers' expectations.
• Indonesia also announced that it plans to increase the royalty rates for several coal miners by 1%, further dampening market sentiment.
• The Indonesian Mining Association has asked the Ministry of Energy and Mineral Resources to reconsider implementing revised royalty rates on coal and metal miners.

Platts assessed the price of 4,200 kcal/kg GAR coal at $49.75/mt FOB on March 20, with the month-to-date average at $49.32/mt FOB. The HBA equivalent of the price published by the government was $50.64/mt FOB on March 15 and $51.93/mt FOB on March 1.

Platts started assessing the 3,400 kcal/kg GAR grade on Jan. 2 at an average of $30.80/mt this month as of March 20. Platts assessed the 3,400 kcal/kg GAR grade at $31.60/mt FOB on March 20, with the month-to-date average at $30.80/mt, compared to the HBA price for 3,400 kcal/kg GAR at $33.71/mt FOB as of March 15.

Market sources said buyers are still looking to postpone their purchasing decisions in the hopes of gaining a clearer understanding of Indonesia's new guidelines. With reference prices for most grades surpassing market prices, sellers and buyers who have spoken to Platts are uncertain whether the market can sustain these HBA prices.

With additional reporting from Pritish Raj and Shriparna Saha