Indonesia plans to stop counting coal sold to the captive power plants that feed its nickel and aluminum smelters toward miners' domestic market obligation, a change that would push tens of millions of tons of cheap coal back toward state utility PLN. Captive plants took 78.5 million metric tons of DMO coal last year, according to data compiled by Bloomberg Technoz.

The shift matters for investors on both sides of Indonesia's resources trade. Coal miners lose an easy way to satisfy the domestic quota at market prices, and the smelters at the heart of the nickel downstreaming push may need to rethink how they secure fuel.

Tri Winarno, director general of minerals and coal at the Energy and Mineral Resources Ministry, said the policy was not yet final but would take effect soon, Bloomberg Technoz reported on Oct. 23. Reuters carried similar remarks on Oct. 29, citing Tri as saying the change would improve coal supply to the on-grid power sector. Kontan reported that he had not named the regulation or a start date.

How Indonesia's coal DMO works

Under the domestic market obligation, Indonesian coal miners must sell at least 25% of their output to local buyers, according to Reuters. Sales to PLN and independent power producers are capped at $70 a metric ton, and sales to selected industries such as cement, fertilizer and textiles at $90. The power-sector ceiling has not changed since 2018.

Captive power plants, which are built by industrial estates and smelters rather than connected to the national grid, carry no price cap. That has let miners sell to them at market prices while still ticking the DMO box. Tri said captive plants must buy at market prices and do not qualify for the $70 rate, Bloomberg Technoz reported.

The volumes are large. DMO coal absorbed by captive plants, including those serving mineral processing, rose to 78.5 million tons in 2025 from 69.5 million tons in 2024, according to the outlet's figures. Plants run by PLN and independent producers took 145.5 million tons, up from 133.5 million tons. Total DMO realization reached 254 million tons in 2025.

Captive coal capacity has grown much faster than the grid. It stood at 19.7 gigawatts in 2025, compared with 1 GW in 2000, while PLN and private grid-connected plants grew from 7.3 GW to 41 GW, Bloomberg Technoz reported. Nickel processing accounts for about 14.1 GW, or 71.6%, of captive capacity, according to data from the nongovernmental group Trend Asia cited by the outlet, followed by aluminum at 2.4 GW.

Who gains and who pays

For PLN, the aim is supply security. The utility needs about 154 million tons of coal a year, Bloomberg Technoz reported. The ministry initially assigned about 190 million tons in DMO volumes and later raised the total to 212 million tons to cover medium-quality coal for PLN and private generators.

The change has been under discussion for months. Marwan Batubara, executive director of the think tank Indonesia Resources Studies, proposed in early October that coal sold to private smelters be permanently excluded from DMO calculations and that the obligation become a dedicated electricity quota from 2027, Kompas reported. He linked rolling blackouts in Java in June partly to coal shortfalls at power plants, the newspaper said. Smelters took about 70 million tons of the 239 million-ton DMO target in 2025, according to the Kompas report.

For miners, the likely result is lower average prices. If captive sales stop counting, more of each producer's 25% quota would have to go to PLN-linked buyers at the capped price. Bloomberg Technoz said miners' profits could fall as a result. Gita Mahyarani, executive director of the Indonesian Coal Mining Association, said the plan needs further assessment and clarification from the government, according to Reuters.

Smelter operators face a different question. They already pay market prices, so the direct cost change may be limited, but Kontan said they should prepare to secure fuel for their plants and plan for higher operating costs. Tri said coal supply to captive plants remains secure.

The proposal reaches investors at a fragile moment for Indonesian assets. The Jakarta Composite Index lost 16.7% in October, its worst month since March 2020.

Output running ahead of quota

Supply is not the constraint. Indonesia produced about 515 million tons of coal from January to September, or 85.8% of its initial 600 million-ton quota for 2026 and 71.5% of a 720 million-ton projection, Bloomberg Technoz reported. Exports totaled 343.1 million tons and domestic sales 171.9 million tons over the period.

Indonesia is the world's top exporter of thermal coal, according to Reuters, so the split between capped-price home sales and exports shapes both miners' margins and seaborne supply.

The next marker is the ministry's DMO decision for 2027 and the work plans miners submit for next year. Those documents will show whether captive sales are formally excluded and how much each producer must deliver to the grid.