JAKARTA -- Severe drought precipitated by the El Nino climate phenomenon has hit rivers in Kalimantan provinces, Indonesia's main production hubs for coal and palm oil, disrupting deliveries of the commodities and threatening production and price increases.

Indonesian coal miner Indo Tambangraya Megah last month reported a 40% drop in its transport capacity after drought dropped water levels on the Mahakam river in East Kalimantan, reducing navigability for coal barges.

Major exporter Alamtri Resources Indonesia cited similar logistical challenges as drought left the Barito river in South Kalimantan unusually shallow. A subsidiary of the company, Adaro Andalan Indonesia, relies on the river to transport coal from its mine to an export port in the province.

"The company continues to monitor conditions on the Barito River," Alamtri spokesperson Karina Novianti told Nikkei Asia on Wednesday.

Hendra Sinadia, head of the mineral and coal mining committee at the Indonesian Employers Association, said receding water levels in Kalimantan were estimated to have disrupted shipments of roughly 3.9 million metric tons of coal last month. That is more than 10% of Indonesia's average monthly coal export volume in the first eight months of 2026. Meanwhile, "Demand from buyers shows no signs of weakening," said Sinadia.

Indonesia is the world's largest exporter of thermal coal, which is used to feed power plants, and counts India, China, Japan, the Philippines and Vietnam among its main markets.

Limited road connectivity in Kalimantan, the Indonesian part of Borneo, has always left the region heavily dependent on rivers for freight and passenger transport. Residents have seen water levels in major rivers and their tributaries fall sharply in the past two months amid a lack of rains as a particularly strong El Nino comes on.

Mahakam river in Samarinda, East Kalimantan province: Indonesian coal barges have been told to reduce their loads in order to sit higher in the water.

Antara Sinadia said he has received no report so far of miners declaring force majeure or defaulting on contracts because of transport disruptions.

On Sept. 14, major producer Bayan Resources declared force majeure on its coal supply commitments, but that was due to a delay in the government's review of the company's production plan. Bayan lifted the force majeure the following week after its production increase was approved.

Coal prices have rebounded since the beginning of 2026 after Indonesia announced production quota cuts for miners in a bid to prop up prices, which fell to a four-year low in 2025. The energy crisis driven by the U.S. and Israeli attack on Iran in late February, and the subsequent closure of the Strait of Hormuz, has further raised prices. Coal futures fell between July and August but have spiked again over the past month, standing near $150 per ton on Thursday.

Data platform Trading Economics said Indonesia's coal shipments fell 23% year on year in August to their lowest level for the month in five years -- "constrained by government production quotas, policy uncertainty, and shipping disruptions caused by a strong El Nino."

"At the same time, global coal demand is on track to reach a record high this year amid gas supply disruptions stemming from the Iran war," it said. In early September, the port authority in East Kalimantan issued an instruction for operators to reduce barge loads from the usual 7,000 tons to between 5,500 and 6,000 tons, thereby reducing the draft.

Anthony Prayugo, an assistant vice president at Moody's Ratings, told Nikkei Asia that prolonged disruptions could delay shipments and potentially lead affected producers to declare force majeure, further lowering export volumes and tightening spot supply "particularly for Indonesian thermal coal, which remains an important fuel source across Asia."

An oil palm plantation wildfire in Ketapang regency, West Kalimantan province, contributing to transboundary haze and impairing navigational visibility. Prayugo added that if the condition persists, "stockpiles may build up and eventually constrain production at some mines," putting further upward pressure on coal prices.

The disruption extends beyond coal.

In West Kalimantan, low water levels on the Kapuas River -- Indonesia's longest river and a major transport artery -- are hampering shipments of palm oil, another major export commodity for the resource-rich country. Eddy Martono, chairman of the Indonesian Palm Oil Association, said falling river levels force producers to seek alternatives to their usual barge routes, resulting in higher transportation costs. He told Nikkei Asia that delays also increased storage expenses, as crude palm oil requires controlled heating to maintain quality while awaiting shipment.

The reduced storage capacity has forced some mills to suspend purchases of fresh fruit from farmers.

The lower water volumes are also disrupting transportation of other goods and passengers. Mars Eka Legowo, president director of Pertamina Patra Niaga, a distribution arm of state energy conglomerate Pertamina, said lower water levels hampered tanker access to fuel terminals in West Kalimantan, disrupting distribution of biodiesel.

Local ferry service operators have other complaints, including Dhama Lautan Utama, which operates along the Barito river connecting central and south Kalimantan. Khoiri Soetono, a company director, said sediment buildup and haze due to raging forest and peatland fires in many parts of Kalimantan are also hindering navigation.

"When shoaling coincides with haze that restricts visibility, the risks inevitably increase because vessels have less room to maneuver safely," he said.