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Maguire: Natural gas bulls need to bemoan Indonesia’s coal export woes

The gloomy state of Indonesia's thermal coal exports should alarm both natural gas developers and exporters.

The largest thermal coal exporter in the world is set to experience a rare drop in sales, after shipping the smallest amount of coal in three years in the first five months in 2025.

In order to combat falling sales, regional traders of coal have reduced export prices, bringing them down to the lowest level in four years. This has led to a reduction in the cost for coal-fired electricity production in Asia.

It's bad news indeed for the natural gas bulls who are eyeing Asia as their primary growth market, but are struggling to replace cheaper coal in power systems throughout the region.

Top Markets Shrink

Indonesian coal exports to China and India, the two biggest coal consumers in the world, have fallen by 23% and 14 % respectively this year. This is because coal miners from these countries increased their domestic production and reduced demand for imported coal.

According to Kpler, a commodities trade intelligence company, Indonesia exported less than 188 million tons of coal for power generation between January and May.

This was 12%, or about 25 million tons, less than the same period in 2024. It was also the lowest total for this period since 2022.

The sales of the top market China were down 23%, or 20 million tons, compared to January-May 2024. Sales to India fell 14%, or 6.5 millions tons.

Exporters of Indonesian coal are trying to make up for the lost volume by selling to other markets.

The softening of consumer and manufacturing demand in the world has also led to a decrease in demand for industrial fuels, such as coal, on other major import markets like South Korea, Japan and Taiwan.

Eight of the top ten markets for Indonesian coking coal have seen their imports fall year over year so far in 2025.

CUT THE THROAT

In order to combat declining sales, traders of coal in Indonesia, Australia and Colombia, South Africa, Russia, and South Africa have all reduced prices this month. Many key benchmarks for international coal are currently trading at more than four-year lows.

The region is already heavily dependent on coal as a fuel, with over half of its electricity coming from it. Lower coal prices are likely to increase this dependence, particularly if economic growth and profits remain low.

The lower coal prices are also a factor that undermines the appeal of building new natural gas-fired plants in the area, particularly in areas where solar power can be installed more quickly and help to boost power supplies in the near future.

GAS GROWTH

Global Energy Monitor's data shows that natural gas plants produce 10% of Asia’s electricity.

Gas bulls are optimistic that Asia will continue to build more capacity for gas generation. GEM data indicates that two-thirds (or 63%) of the new global gas power generation capacity is currently being built on the continent.

Additional 61% of the gas projects that are in pre-construction, where deals have already been proposed, but capital and sites still need to be secured, are in Asia.

The majority, if no all, of gas projects under construction will be completed, particularly the 53 GW new capacity expected in China and Taiwan, where older coal-fired plants are to be replaced with newer gas ones.

Singapore and South Korea are both gas importers, so the fact that they have 7 GW of additional capacity under construction should be a good sign for their international gas export potential.

It is still unclear how much additional gas generation capacity in Asia will be built, particularly in countries like Indonesia and the Philippines, where government funds are scarce for large energy investments.

In recent years, gas project delays have affected both Indonesia and the Philippines. This has undermined commercial support for gas projects in these countries, particularly when solar power is now more readily available.

Gas power projects are also affected by the rapid cost reductions in solar energy and battery storage, particularly in countries where there is a strong social push to reduce fossil fuel dependence.

Exporters of LNG and natural gas are already experiencing a delay in the growth of their potential volumes of exports by several years. This is putting pressure on LNG prices near-term.

Many gas bulls may change their tune if coal prices continue to hover near multi-year lows.

These are the opinions of the columnist, an author for.

(source: Reuters)