Workers strike at Colombia's main coal railway

Reuters News
Posted: Jul 23, 2012 12:12 PM
Workers strike at Colombia's main coal railway

By Jack Kimball

BOGOTA (Reuters) - Laborers at Fenoco, Colombia's main coal railway, went on strike on Monday over pay and working conditions, the company and a senior union official said, threatening to paralyze more than half of shipments from the world's fourth-largest coal exporter.

The stoppage comes five days after workers at a coal mine owned by Glencore's Prodeco unit walked out, although the two strikes would have to be prolonged to lift prices as Atlantic and Pacific markets are oversupplied despite a strong coal burn across much of Europe.

Workers at the Fenoco railway went on strike at 6 a.m. local time, Ricardo Machado of the Sintraminergetica union told Reuters by telephone. Fenoco President Peter Burrowes confirmed the strike.

Shareholders in Fenoco include Glencore International Plc's Prodeco unit, Drummond International and Goldman Sachs Group Inc's Colombian unit. The mining companies are among the top coal producers in Colombia.

Daily coal supply to ports via Fenoco is up to 160,000 tons and the train has an annual capacity of 42 million tons or more, according to the company.

The most likely impact from the strike would be delays in ship loading. Colombian producers usually keep around 5 percent to 10 percent of annual output as stocks at port and would use those to meet obligations, industry sources say.

Prodeco is believed to have at least a month of stocks at its Caribbean port while the impact on spot prices from Drummond would probably be muted in the short term since the company has sold out its coal for this year, according to industry sources.

Last week, coal miners at the La Jagua mine owned by Prodeco -- Colombia's third-largest coal producer -- went on strike over compensation in the northern Cesar province.

Colombia's coal industry is dominated by big thermal producers with their own port and rail facilities such as Glencore, Drummond and Cerrejon, which is owned equally by BHP Billiton, Anglo American and Xstrata.


All major coal producers in Colombia have plans to boost coal production and capacity at ports. The government sees output growing by 5 percent this year to 90 million tons, and has set ambitious growth targets over the coming years.

The government does not expect the strikes to have an impact on production goals for this year.

The Andean country has seen record foreign investment, mainly into the oil and mining sectors, pushing coal output to historic highs over the last decade after a U.S.-backed military offensive drove rebels into remote jungle and mountain hideouts.

Colombia's thermal coal industry, however, has been suffering from a spate of bomb attacks and strikes over the last year -- rebels have blown up sections of Cerrejon's and Fenoco's railways in 2012.

Infrastructure bottlenecks and delays in environmental permits are also a key worry for the sector.

Fenoco, which wants to double capacity, has faced hurdles in the plan since first agreeing to build a double rail line in March 2006. It was supposed to be operational in 2008 but has been delayed by environmental concerns.

Fenoco has been hit by a series of accidents over the last year, and the government has clamped down, requiring the company to send regular updates on how it is progressing with changes aimed at preventing derailments.

(Editing by Jeffrey Benkoe and Dale Hudson)