Coal - HBA update: positive, but competitiveness concerns

Coal - HBA update: positive, but competitiveness concerns The Ministry of Energy and Mineral Resources (MEMR) has introduced a new regulation requiring Indonesian coal exports to use the Indonesian Coal Reference Price (HBA) starting Mar 1, 2025, replacing previous indices like ICI. Key points: • HBA will set the minimum price. • HBA will be updated on the 1st and 15th of each month. • HBA will be based on the actual selling price (70%) and historical prices (30%). • Long-term contracts remain but must be adjusted to HBA. • DMO prices stay at US$60/t for PLN and US$90/t for industries. (Source : The Ministry of Energy and Mineral Resources) Comment : MEMR’s bi-weekly HBA pricing improves market reflection, but the unchanged formula (1-month lag) may still keep Indonesian coal prices above global levels, raising concerns over competitiveness, especially during price downturns. The royalty remains unchanged, potentially adding pressure on miners. Overall, we see MEMR's move as positive but caution on potential impacts during down-cycles. Our preference: AADI > PTBA > ITMG.