With the situation in the Middle East still uncertain and no meaningful progress towards de-escalation, persistent disruptions to oil and LNG flows through the Strait of Hormuz are reinforcing thermal coal’s role among Asian importers as an alternative source of power generation. Higher oil and LNG prices, together with energy-security concerns, have encouraged utilities to maximise coal-fired generation where possible, particularly as the summer peak in electricity demand approaches. Against this backdrop, Indonesia’s decision to centralise strategic commodity exports through a state-controlled channel becomes increasingly consequential.
The policy aims to provide the government greater control over revenues linked to the country’s natural resources, by centralising exports of key commodities, including coal, crude palm oil and ferroalloys, through DSI, a state-owned entity. The rationale centres on strengthening state oversight, reduce the erosion of export revenues from non-transparent trade practices, and ensure that a larger share of export proceeds is captured by the Indonesian government. Following a transitional period beginning in June, during which exporters will initially be required only to report their export activities to DSI, the full centralised mandate is expected to take effect from January 2027, giving DSI a direct role in managing export transactions under the new regime.
The shift has raised concerns among market participants, particularly around execution risk, operational efficiency and commercial flexibility. By inserting a state-controlled entity into the export chain, the process could become more bureaucratic, adding another layer to documentation, approvals, pricing reviews and cargo allocations. This may create inefficiencies, including slower execution, shipment delays and uncertainty around cargo timing. Working-capital requirements are also a concern ahead of full implementation, as DSI is expected to act as a cargo buyer, purchasing large quantities of commodities rather than merely an administrative intermediary.
For dry bulk markets, the significance lies mainly in Indonesia’s scale within seaborne thermal coal trade, as the Southeast Asian country is a market leader, accounting for roughly half of global seaborne exports. Any disruption to Indonesia’s export process would therefore carry implications well beyond the domestic commodity market.
Initially, the centralisation of Indonesian coal exports may trigger some front-loading of cargoes, especially in Q4 2026, as importers seek to secure Indonesian volumes, before the new export scheme becomes fully operational, supporting short-term shipment activity.
After full implementation, the impact will depend on whether market concerns prove justified and the policy results in operational bottlenecks. Should bureaucratic delays or operational inefficiencies emerge, thermal coal trade flows could see some gradual readjustment, with the impact centred on the main vessel segments carrying Indonesian thermal coal, Panamax/Kamsarmax and Ultramax/Supramax units.
However, any adjustment is likely to be measured rather than immediate, given Indonesia’s strategic importance to Asia’s two largest thermal coal importers, China and India. The sheer scale of Indonesian export volumes, together with the country’s short-haul proximity to major importers and its ability to respond quickly to spot cargo requirements, means any meaningful displacement of Indonesian coal is likely to be gradual and limited in the near term.
Alternative suppliers may nevertheless benefit. South Africa could increase shipments to India, where it already has an established presence, while Australia may also gain market share. China may cover part of any shortfall through higher Russian thermal coal imports, alongside selective increases in Australian supply.
Overall, the policy shift introduces a layer of uncertainty to thermal coal trade at a time when energy security concerns continue to underpin the commodity's strategic importance. For dry bulk shipping, especially the mid-sized segments, the near-term effect is expected to be supportive due to the front-loading of volumes ahead of full implementation. Thereafter, if Indonesia’s new export regime creates logistical inefficiencies, the subsequent reshuffling of thermal coal trade flows may generate additional ton-mile demand, particularly if replacement volumes originate from more distant suppliers such as South Africa and Australia.
Data Source: Intermodal