Indonesia's recent efforts to impose a government-mandated coal benchmark price or Harga Batubara Acuan (HBA), on exports face resistance from its largest buyer, China, Reuters reported. Despite regulatory implementation since March 2025, most Chinese buyers continue to rely on the Indonesian Coal Index (ICI), citing concerns over the transparency, frequency, and cost of the HBA. With Chinese coal demand cooling and Indonesia's producers already operating under cost pressure, the policy risks undermining both trade competitiveness and investor confidence.

The policy shift

The February 2025 Harga Batubara Acuan (HBA) benchmark is set at $124.24 per tonne for premium Indonesian coal, marking a significant $19.24 per tonne premium over Australian Newcastle futures, which are priced at $105 per tonne. Discovery Alert reported that this price gap is more than just a numerical difference, it reflects deeper shifts and strategic challenges within the global coal market.

The disparity highlights the risk of potential revenue erosion if market forces are left unchecked. By setting a fixed price through the HBA, Indonesia aims to create a more predictable framework for market behavior. Transitioning from monthly to bi-monthly pricing updates signals Indonesia’s efforts to align more closely with real-time market movements.

In a strategic move to gain more control over coal pricing, the Indonesian government began enforcing the use of the HBA benchmark for spot exports on March 1. Previously used only for royalty and tax calculations, the HBA is now intended to influence the export value of thermal coal, a key revenue source.

The shift is part of broader efforts by Jakarta to reclaim sovereignty over natural resources, stimulate domestic downstreaming, and increase fiscal receipts from mining, similar to policies affecting palm oil and nickel.

Technical foundations of the HBA pricing model

The HBA price structure is based on a detailed methodology that incorporates several key quality indicators:

• Coal’s calorific value
• Ash content
• Moisture levels
• Sulphur concentration

By factoring in these technical specifications, the pricing system moves beyond simple supply-demand dynamics to reflect the intrinsic value of the coal itself. This more refined approach provides a deeper and more accurate valuation, earning praise from analysts who expect it to help stabilise market fluctuations.

Industry research also points to the broader benefits of this enhanced pricing framework, suggesting it boosts operational efficiency and strengthens trading confidence. Discovery Alert also pointed out that there are similar findings have been observed in related studies, such as those exploring the effects of China's economic stimulus efforts.

The pushback

China, which imported $17.2bn worth of Indonesian coal in 2024, has largely rejected the new pricing benchmark. Chinese traders stated the lack of transparency in the issuance, as the HBA is published less frequently and with less methodological clarity than the market-driven ICI. The HBA's elevated cost also has deterred buyers already facing weaker domestic demand and rising port inventories.

As a result, the majority of Chinese contracts, particularly long-term ones, still refer to ICI pricing, with traders and producers hesitating to switch due to frictional costs and familiarity.

Within Indonesia, the policy’s implementation has been uneven. Coal producers cite operational losses due to elevated HBA prices and limited buyer adoption. Analysts such as Toby Hassall from LSEG warn the policy could deter investment, as foreign capital seeks stability and market-aligned benchmarks. Meanwhile, industry groups report minimal use of HBA even months after launch.

Julian Julian of the Ministry of Energy and Mineral Resources confirmed an internal policy review is underway but declined to provide details, underscoring the political sensitivity and uncertain direction of the reform.

Market pressure and uncertainty

The HBA policy coincides with falling Chinese coal demand:

• Imports dipped 6% year-on-year in March, while Indonesian coal shipments dropped by 9%, according to Chinese customs data.
• Thermal coal imports, Indonesia’s main export segment, are expected to fall by 5% in 2025 (CCTD forecast), reducing Indonesia’s pricing leverage.
• Port congestion and inventory build-up have prompted firms like China Shenhua to halt spot purchases.

This external weakness compounds the challenges facing Indonesia’s exporters and reduces the efficacy of pricing reforms.

Strategic and fiscal implications

Permata Bank’s Chief Economist Josua Pardede notes that while the HBA could enhance government revenue, it risks backfiring if buyers pivot to alternate sources like Russia, Australia, or domestic supply.

Indonesia’s long-term goal of exerting more influence over commodity pricing remains elusive, as market realities, particularly buyer preferences and global demand dynamics, continue to dictate outcomes.

Indonesia’s push to enforce HBA pricing underscores its ambitions to tighten control over its vast coal sector. Yet, without buy-in from major buyers like China and amid unfavorable market conditions, the policy risks alienating investors and eroding trade competitiveness. A recalibration may be necessary to balance fiscal objectives with market functionality.