Fitch Ratings-Singapore-21 June 2022: The credit profiles of Indonesian coal miners and coal contractors will remain strong through 2022, even though coal prices will moderate in 2023, Fitch Ratings says in a new report. Liquidity for the sector’s rated entities remains robust on strong earnings, modest capex for most companies and no major near-term debt maturity. All rated coal producers and contractors are on a Stable or Positive Outlook due to wider rating headroom amid strong earnings forecasts into 2023.
Earnings in 1Q22 remained strong for most entities in the sector, even though EBITDA levels declined from the previous quarter, which was exceptionally strong on record prices coupled with sales catching up after a weaker 3Q21 due to high rainfall. Fitch expects earnings in the second half of 2022 to remain strong on supportive prices and robust operations.
Fitch revised up their thermal coal price assumptions for 2022-2023 on 16 June. Our increased thermal coal assumptions reflect high year-to-date prices, supported by tight supply due to the Australian wet season, strong Indian demand mitigating lower demand in China, and structurally higher prices of Newcastle 6,000 kcal/kg. We expect prices to subsequently align with our earlier long-term assumptions on continual coal substitution in the energy mix.