The world's biggest coal exporter is selling into a war price spike

Indonesia sells more coal abroad than any other country, and that coal is now worth much more. Al Jazeera reports that the war between Iran, Israel and the United States has closed the Strait of Hormuz, the narrow sea passage that carries about a fifth of the world's oil and liquefied natural gas. Power companies that lost their gas went back to coal instead. Coal sold for $131.85 a tonne in July, against $102.20 a year earlier.

The extra demand is mostly in Asia. Japan lifted limits on its older coal plants. Pakistan made 90 percent more of its electricity from imported coal by July than a year before, and South Korea, Bangladesh and Thailand also burned more. Producers are enjoying it: the South African miner Thungela Resources doubled its profit for the first half of the year. World coal output is expected to rise 1.8 percent by the end of 2026.

Jakarta decided to take the money. In March the government dropped its plan to cut coal production, a plan meant to clear a glut and lift prices from the supply side, and chose to sell into the war prices instead. Indonesia was one of more than 40 countries that promised at the COP26 climate summit in 2021 to use less coal.

Nick Hedley, an energy transition analyst at Zero Carbon Analytics, says nothing has really changed about coal itself. It only looks good when gas turns expensive, he says, and "coal still cannot compete with renewables on cost." The lesson he draws for Asia is to move faster to clean power, so the next war somewhere else does less damage at home.

Why it matters

Higher prices mean more export earnings, and more royalty and tax money reaching the state budget, which is the argument for keeping the mines running flat out. The bill arrives in the places that do the digging: more mining, more trucks and more dust for as long as prices stay high, and a longer wait for cleaner electricity. Watch whether the production cap comes back when the price falls, because a war premium can vanish in a month while a new mine lasts for years.