Indonesia, a titan in global commodity markets, is executing a bold, two-pronged strategy to reshape its vital mineral sectors. The government has unveiled significant production cuts for both coal and nickel, signaling a strategic pivot aimed at domestic demand management, price stabilization, and long-term resource stewardship. This decisive action promises to send ripples through international supply chains and commodity prices.

Indonesia’s Coal Sector Navigates Production Cuts and DMO Hike

The nation’s coal industry is bracing for a significant recalibration as the Ministry of Energy and Mineral Resources (ESDM) tightens the reins on output. The move reflects a nuanced balancing act between securing domestic energy needs and optimizing export potential.

Sharper Cuts Than Anticipated, But Strategic Exemptions

ESDM Director General Tri Winarno announced on Tuesday, February 10th, a projected cut to Indonesia’s 2026 domestic coal production, targeting a level above 600 million tons. This figure represents a more aggressive reduction than the previously anticipated 600 million tons, starkly contrasting with the 2025 realization of 790 million tons. Winarno clarified that this curtailment is meticulously designed to meet domestic industrial demand and the crucial needs of PT PLN, the state electricity company.

Crucially, holders of first-generation PKP2B permits and state-owned enterprises (BUMN) with IUP permits will be exempt from these quota reductions in 2026. However, this leniency comes with a new mandate.

The Tightening Grip of Domestic Market Obligation

For the exempted PKP2B Gen I and BUMN IUP holders, a steeper Domestic Market Obligation (DMO) of 30% has been imposed from early this year, a noticeable increase from the previous 25% requirement. This adjustment effectively places a tighter leash on their export capabilities, ensuring a greater proportion of their output serves the domestic economy before reaching international buyers.

Industry Voices the Impact of Quota Adjustments

The implications of these cuts are already reverberating through the industry. Gita Mahyarani, Executive Director of the Indonesian Coal Mining Association (APBI), reported that some of her members have faced drastic production quota reductions, with some reaching up to 80% of their initial Work Plan and Budget (RKAB) proposals. More broadly, Mahyarani indicated that the production quota cuts for 2026 vary, generally falling within a 40% to 70% range. While most of the Phase 2 RKAB evaluations have been issued, the door remains open for potential re-evaluation before the final RKABs are officially released and all requirements are met, suggesting a dynamic and potentially evolving landscape.

Nickel Output Slashed to Reinvigorate Global Prices

In a parallel and equally impactful move, Indonesia has formally reduced its nickel ore production quota for 2026, a direct response to global market dynamics and a strategic play to buoy prices.

A Bold Move to Stabilize the Market

The ESDM has officially slashed the 2026 nickel ore production quota under the RKAB to a range of 260-270 million tons. This represents a significant reduction of 29-31% compared to the 2025 RKAB quota of 379 million tons. This aggressive measure is explicitly designed to re-energize sluggish global nickel prices, which experienced a period of stagnation throughout 2025. Director General Tri Winarno had previously, on Wednesday, January 14th, hinted at a 2026 nickel ore quota of 250-260 million tons, emphasizing that adjustments would be made in alignment with existing smelter capacities.

Weda Bay Nickel Bears the Brunt of Reduced Quotas

The impact of these cuts is not uniform, with some major players facing particularly steep reductions. Bloomberg
reported that PT Weda Bay Nickel, a joint venture involving Tsingshan Holding Group Co., Eramet SA, and Aneka Tambang (ANTM), received a drastically reduced production quota of just 12 million tons of nickel ore for 2026. This is a precipitous drop from its 2025 quota of 42 million tons. Eramet has since confirmed this substantial reduction and indicated its intention to file for a revision, highlighting the immediate and direct challenges these new quotas pose to key industry players.

These decisive interventions by the Indonesian government underscore a commitment to strategic resource management. By calibrating output for both coal and nickel, Jakarta aims to fortify its domestic energy security, stabilize critical commodity prices, and ultimately, steer its extractive industries toward a more sustainable and economically robust future.