Colombian coal railway talks stuck; Cerrejon attacked

Reuters News
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Posted: Aug 08, 2012 5:34 PM
Colombian coal railway talks stuck; Cerrejon attacked

By Jack Kimball

BOGOTA (Reuters) - Colombia's main coal railway and striking workers remain in a deadlock over a 17-day walkout that has shut off more than half of coal exports, but the company plans to seek a meeting with laborers next week to end the strike, officials said on Wednesday.

While the strike in Colombia, the world's fourth-largest coal exporter, has reduced supply and encouraged cautiously bullish sentiment, there is still too much coal in both the Atlantic and Pacific markets to have a big impact on prices.

Peter Burrowes, the president of Fenoco railway, told Reuters that he would call a general assembly of workers early next week to ask them to vote on whether to continue the walkout or send the dispute to arbitration and return to work.

He also said that a court decision about the legality of the strike could come as soon as Friday afternoon. The three-judge panel could delay the decision, and any ruling may be appealed to the supreme court. The union says the strike is legal.

If the court rules the action illegal, the company could fire workers involved in the walkout, but it would not necessarily put an end to the walkout.

The vote next week by the general assembly, however, could see laborers return to their jobs.

The Labor Ministry had hoped to broker a deal last weekend, but talks hit a snag over demands by both Fenoco and by the union. Fenoco demanded that 10 trains stuck on the tracks first be moved, while the union demanded that workers fired in a 2009 strike be reinstated.

"There haven't been meetings with the company since Sunday. The company hasn't made any proposals that could lead to a solution to the problem," Felix Herrera, president of the Sintraime union, told Reuters.

The strike at Fenoco - which moves coal for Drummond International, Glencore's Prodeco unit and a Goldman Sachs affiliate - has removed 1.5 million tonnes from the country's exports this year, sources said.

Colombia's ports, in common with those of most coal-exporting countries, tend to run at maximum capacity, so it may be impossible to catch up later this year with any spot shipments that have been missed, industry sources said.

Drummond, whose Colombian coal operations are 20 percent owned by Japan's Itochu Corp, and Prodeco have declared limited force majeure on some cargoes as the walkout starts to bite.

The strike has given some upward push to global prices.

"The Colombia situation should take out some supply, and there will be more buying for Q4, which could raise prices, but the (global) macro problems could work against that," one utility source said.

CERREJON ATTACKED

In addition to the supply constraints out of Colombia by the strike plus a walkout at Prodeco's La Jagua mine, Cerrejon, the country's largest coal exporter, has been undergoing a week-long planned maintenance of its operations.

"Colombia isn't really moving any coal at the moment. Cerrejon because of maintenance and the others because of strikes," a Colombian coal industry source said.

Cerrejon said it was hit early on Wednesday by "a terrorist attack" that damaged its railway, but it expects the line to be fully operational again on Thursday.

The company did not blame any group for the assault, but the Revolutionary Armed Forces of Colombia, or FARC, are active in the northern La Guajira province where the tracks are located.

Cerrejon exports 32 million tonnes of coal annually.

Because of the planned maintenance this week, the bombing did not impact exports from the company, which is equally owned by BHP Billiton, Anglo American and Xstrata.

Colombia's coal output has risen to historic highs over the last decade, driven by record foreign investment, mainly in the oil and mining sectors, after a U.S.-backed military offensive drove rebels into remote jungle and mountain hideouts.

Colombia, Latin America's fourth-biggest economy, has battled Marxist insurgents for nearly five decades, and despite the security crackdown, guerrillas have stepped up their attacks recently.

"It's true that terrorist actions have gone up in general in the country and they're affecting in some way the normality of companies," Julian Gonzales, Cerrejon's vice president of public affairs, told Reuters.

"I don't believe that we'll have an effect on the issue of complying with our obligations."

(Editing by Leslie Adler)