Indonesia's Coal Production Growth to Slow, Fitch Ratings Says

By Leony Aurora

Nov. 21 (Bloomberg) -- Indonesia's coal production growth will slow as the global credit crisis hampers expansion plans by the world's biggest exporter of the fuel, Fitch Ratings said.

``Companies that had not secured long-term funding will likely have to cut back'' on their spending, Jessie Wahab and Kalai Pillay at the ratings company said in a report today. ``This, together with the fall in economically mineable reserves given the fall in coal prices, may result in slower production growth in the future.''

The worst financial crisis since the Great Depression is forcing Indonesian coal producers including PT Adaro Energy to review expansion plans. Thermal coal prices have halved from a record $194.79 a metric ton in July as crude prices slid with lower demand.

The compound annual growth rate in Indonesia's coal production fell to 12.2 percent between 2003 and 2007 from 16.8 percent in the five years to 2006, Fitch said. ``The growth rate in 2008 is further hindered by the global shortage of mining equipment.''

Adaro, which owns Indonesia's second-largest coal producer, is reviewing output plans for 2011 and beyond, it said on Nov. 11. The company had planned to double annual production capacity of the fuel to 80 million tons in five years.

To contact the reporter on this story: Leony Aurora in Jakarta at laurora@bloomberg.net.