Cheap coal undercuts Asian gas

Developers and exporters of natural gas should be alarmed by the dour state of thermal coal exports coming out of Indonesia.

- Gavin Maguire

The world's largest thermal coal exporter is on course for a rare decline in annual sales after shipping out the smallest tonnage in three years during the opening five months of 2025.

To combat declining sales, regional coal traders have cut export prices to their lowest in four years, which in turn are reducing the cost of coal-fired power production across Asia.

That's bad news for natural gas bulls, who eye Asia as their main potential growth market but are already struggling to displace cheaper coal from power systems across the region.

Indonesian coal sales to the two largest coal consumers — China and India — dropped by 23% and 14% respectively so far this year as coal miners in those countries lifted domestic output and reduced demand for imports.

Indonesia exported just under 188 million metric tons of coal used for power generation during January to May, according to commodities trade intelligence firm Kpler.

That total was 12% or about 25 million tons less than during the same months in 2024, and was the lowest for that period since 2022.

Sales to top market China are down by 23% or by 20 million tons compared to January to May 2024, while sales to India were 14% or 6.5 million tons lower.