Indonesian coal market participants are monitoring growing supply disruptions in central Kalimantan, where low water levels on the Barito River have forced some producers to declare force majeure on shipments, raising concerns over export availability as a strong El Niño threatens to prolong dry conditions.
Any sustained reduction in river depth could constrain coal movements from mine sites to export terminals, potentially tightening seaborne supply at a time when Indonesian production is already facing constraints from delayed output quota (RKAB) approvals.
The conditions have also hampered deliveries of fuel used in mining operations, forcing some producers to rely on more costly inland transport alternatives.
Parts of the upper reaches of the Barito River have become completely unnavigable, with some mining companies in the area already declaring force majeure on shipments because of the situation, market participants said. Mines in this area primarily produce mid-to-high calorific coal, with several of them producing up to 100,000 t/month, an Indonesian producer told Argus today.
El Niño typically brings drier-than-normal conditions across much of Indonesia, reducing rainfall and lowering river levels. Coal market participants are closely monitoring weather forecasts as prolonged dry conditions could further restrict navigation along the Barito River and other key waterways used by miners in central Kalimantan.
Indonesia's Meteorology, Climatology, and Geophysics Agency (BMKG) last month said the El Niño phenomenon will persist at least until the beginning of the first quarter of 2027, with peak intensity exceeding the strong category. \"The potential drought could be further exacerbated by the potential activation of the positive Indian Ocean Dipole phenomenon from September to December 2026,\" BMKG said.
Market participants said it is hard to quantify the actual volumes being affected by the low water levels on the Barito River, but central Kalimantan accounted for total coal production of around 46.78mn t in 2025, of which 29.54mn t was exported and the remainder sold to the domestic market.
Barging costs soar
Standard barges of around 7,500-10,000t have a draft of around 6.5 metres but water levels are now significantly lower than this at around 3-4 metres on the central and lower stretches of the river, an Indonesian producer said. The low water levels on this stretch of the river have forced producers to limit barge loading capacity to 7,500t and even as low as 3,000-4,000t, producers said. But these options incur higher costs on a dollar per mile basis.
Barging costs vary greatly depending on the distance needed to be navigated between loading stations and seaports or anchorages where coal is loaded onto oceangoing vessels. The Barito River spans around 770km, and market participants said typical barging costs are around $4.50-6.50/t for sets loading at mid-Barito River barging stations. Reducing volumes on 7,500-10,000t capacity barges to 3,000t to account for the reduced draft can effectively double the cost in some cases, a trader said. Standard costs for barging coal from mines on the upper reaches of the river can be as high as $10/t, he added.
The barging-related supply disruptions are happening at a time when Indonesian coal supply is already being crimped by delays in mining companies receiving additional RKAB approvals for the remainder of 2026.
The country in January hinted at a coal output target of 600mn t for 2026, which led to a significant cut in RKABs at the start of this year. This led to many producers seeking to apply for additional approvals after exhausting their previous quotas. Indonesia's overall coal production in 2025 was 817mn t, according to data compiled by the Indonesian Coal Mining Association.
Jakarta subsequently indicated that coal output this year would be higher than the previous indication of 600mn t, but has yet not given an official target. Indonesia exported nearly 524mn t of thermal coal in 2025, according to Indonesian customs data.
Several Indonesian mining firms have received additional RKABs this month, producers told Argus. But there is still supply uncertainty and as a result some mining companies are reluctant to enter into 2027 term contract negotiations with buyers, an official with a large Indonesian mining company told Argus.
Market participants said coal buyers in China and India will be closely watching river conditions over the coming months, with current water levels likely to delay shipments and tighten availability of Indonesian coal in the seaborne market.
By Andrew Jones