China sent a rare shipment of at least three cargoes of coking coal to processors in Indonesia's Sulawesi in May, sources familiar with the matter said, encroaching on a market typically dominated by supplies from Australia and Indonesia.

The world's biggest importer of coking coal, China is not a major exporter of the steelmaking fuel, and has exported it to Indonesia only three times since the start of 2024, monthly Chinese customs data shows.

State-run Shanxi Coking Coal Group  sold coking coal to China Risun Group, which was later exported to Indonesia last month, three sources said. Risun runs one of the largest coke-processing plants in Indonesia's Sulawesi region.

The state-run group sold another cargo to Hong Kong Jinteng Development  for export to Indonesia, the source said, while the second source added that it also sold a third cargo to a Dexin Steel plant in Indonesia.

The sources sought anonymity as they were not authorised to speak on the issue.

Shanxi Coking Coal, China Risun and Dexin Steel did not immediately respond to requests seeking comment. Reuters was unable to reach Hong Kong Jinteng Development.Independent consultant Lawrence Yan said the moves were designed to test the economic feasibility of Chinese supply and show traditional sellers, such as Australia, that Indonesian plants had alternatives.

Higher costs and strong competition from Russia and Mongolia made it unlikely the trade would become mainstream, however, he added.

In the longer term, as China's slowing steel industry could free up supply of coking coal, turning it into a regular export product, an executive at Chinese trading house Winsway said last week.

China exported 78 030 metric tons of coking coal to Indonesia in April, the first shipment since last July. Data for May is not available yet.

INDONESIAN COKE OVERCAPACITY

Coke processing plants in Sulawesi have emerged as a supply hub for metallurgical coke - a raw material used by steelmakers, boosting demand for coking coal, which is used to make the coke.

Indonesia's exports of met coke hit a record high in 2024, according to data from Kpler. However, the region is now struggling with overcapacity, one of the sources said, with utilisation at only 60% to 70%.

Indonesia's met coke exports have also been hit by December's import curbs imposed by major buyer India.