Drummond sharply cuts Colombian coal output due to strike

BOGOTA Aug 13 (Reuters) - Drummond International, Colombia's second-largest coal exporter, is sharply cutting production in the Andean nation as a 22-day strike at the main railway has shut off exports, the company said.

Striking rail workers at the privately held Fenoco company have brought coal exports from the main producing province to a halt, causing some force majeure of major companies and costing the government more than $1.2 million per day in royalties.

"With the railway out of operation, coal exports have ceased and inventory at the mine loadout facility has reached full capacity," Drummond said in a statement sent to Reuters on Monday.

"As such, Drummond, for an indefinite period of time, will be significantly reducing its operations in Colombia," the statement, dated Aug. 10, said.

Drummond, whose Colombian coal operations are 20 percent owned by Japan's Itochu Corp, said the walkout by rail workers was preventing shipment of 80,000 to 85,000 tonnes per day from its mines to its Caribbean port.

Fenoco's shareholders include Glencore International Plc's Prodeco unit, Drummond International and Goldman Sachs Group Inc's Colombian units.

In 2009, striking Fenoco workers held up exports for 27 days.

Fenoco workers are expected to vote on Monday on whether to send the dispute to an arbitration committee and stop the walkout, which would put laborers back to work as soon as Thursday.

Fenoco needs 51 percent of workers to vote to end the walkout. More than 200 of Fenoco's 624 workers belong to the union that walked off the job on July 23 after talks over working conditions and pay increases broke down, officials said.

The dispute between laborers and the private company is starting to push up prices despite the availability of coal in the Atlantic and Pacific markets, causing a cautiously bullish market sentiment.