Mon, 04 Feb 2008
Mumbai (ANTARA News) - Fitch Ratings said it expects the outlook for Indonesian coal producers to remain stable to positive in 2008 on the back of strong global coal demand, the country's ability to increase export volume, and relatively high but stable price.

Jessie Wahab, associate director with Fitch's corporate ratings team in Jakarta, said the continued hike in oil and gas prices has prompted an increasing number of companies throughout the Asia-Pacific region to rely more on coal as a source of power supply.

Wahab said in addition to the regional demand, the Indonesian government plans to build additional coal-fired power plants with a total capacity of 10 gigawatts by 2010 to cope with the current power shortage, as there has not been any major capacity expansion post the financial crisis.

Boosted by the low interest environment, cement and steel manufacturers, which are traditionally high coal consumers, are also thriving on the booming property sector, the ratings agency added in a report.

Supply is inadequate to keep up with the robust coal demand, as major coal exporters such as Australia and South Africa have not been able to grow exports due to infrastructure bottlenecks, Fitch was quoted by Thomson Financial as saying.

China has reduced coal exports to meet own domestic needs and it is notable that China was a net importer during certain periods in the first half of 2007, Fitch added.

Following the widening deficit, consumers have turned to Indonesia to reduce the supply gaps given its abundant coal reserves, low costs and geographical proximity to the large North Asian markets.

"Fitch does not foresee coal price rising as sharply in 2008 as it did in 2007, but expects it to remain high as suppliers will continue to struggle to meet the high demand from the Asia-Pacific region," Wahab added.

Fitch said it also expects more foreign interest in acquiring stakes in existing operators or investing in new mines to secure their coal supplies in the long run.

Nonetheless, high valuation and uncertainty in the domestic regulatory environment are likely to be the key deterrents of possible transactions, Fitch said. (*)



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