Indonesia to enforce HBA-based pricing for coal exports from Mar’25

• Policy to boost Indonesia’s control over global coal pricing
• Concerns emerge about timeliness, accuracy of HBA updates

Mysteel Global: Indonesia will require all thermal coal exporters to use the domestic benchmark pricing index, known as Harga Batubara Acuan (HBA), as the baseline price for transactions, effective from 1 March 2025, the Ministry of Energy and Mineral Resources (ESDM) confirmed during a Zoom meeting on 26 February.

The move follows remarks by ESDM minister Bahlil Lahadalia on 3 February, signalling the government’s intention to adopt an HBA-based pricing policy aimed at strengthening Indonesia’s control over coal pricing in the global market.

The announcement has sparked concerns, particularly regarding the timing of the HBA updates, which often lag behind market conditions and may not reflect real-time trading dynamics, Mysteel Global learnt.

Under the new scheme, the ESDM will update the HBA prices twice monthly – on the first and fifteenth day of each month – instead of the current practice of once a month. The HBA will continue to be set based on prices reported by coal miners for their royalty fee filings with the ESDM, according to the video of the meeting viewed by Mysteel Global.

Currently, Indonesian coal exporters rely on the weekly-updated Indonesia Coal Index (ICI) – collectively produced by Indonesian NGO PT Coalindo Energy and industry agency Argus – for pricing transactions, while royalty payments are based on the HBA. The new regulation will reduce discrepancies between royalty payments and actual sales prices, sources noted.

Typically, the HBA is higher than the ICI. For example, the February HBA for 6,322 kcal/kg GAR coal (TM 12.26%, sulphur 0.66%, ash 7.94%) was set at $124.24/tonne (t), while the ICI for higher-CV grade 6,500 kcal/kg GAR was only $111.68/t as of 21 February, with the four-week average reaching $114.05/t, sources revealed.

Sales to domestic consumers do not have to follow the new HBA pricing system. Under the existing Domestic Market Obligation system, transactions for coal required for electricity and certain industries will continue to be capped at $70/t and $90/t, respectively, based on 6,322 kcal/kg GAR, the ESDM said.

While exporters will be allowed to honour the pricing formula stated in their existing long-term contracts, the government expects adjustments where these contracts permit, the meeting heard.

However, several aspects of the new HBA pricing rule remain unclear, including enforcement mechanisms and penalties for non-compliance.

The new rule is Jakarta’s response to the ongoing price decline in the global coal market, which has already hit the government’s revenue stream and trade surplus hard, Mysteel Global noted. While the policy may help boost export prices, it could challenge Indonesia’s competitive position in the global coal market, especially as the world moves toward reducing coal consumption and while the coal oversupply persists.

“Given the many uncertainties and the incomplete details, the government may continue to refine the regulation after a trial period,” an Indonesian miner told Mysteel Global.

Note: This article has been written in accordance with a content exchange agreement between Mysteel Global and BigMint.