UPDATE 1-Colombia's Cerrejon calls limited force majeure as coal strike bites
* Cerrejon workers have been on strike since Feb. 7 * All major Colombian producers suffering from problems * Colombia is the world's fourth-largest coal exporter By John McGarrity and Jack Kimball LONDON/BOGOTA, Feb 19 (Reuters) - Colombia's largest coal exporter Cerrejon has declared force majeure on at least some of its cargoes as a strike looks set to enter a third week, its CMC marketing arm said on Tuesday. Around 10 vessels have been unable to load coal since workers downed tools on Feb. 7 in the mine's first strike since 1990, CMC Chief Executive Howard Gatiss said. A joint venture between Anglo American, BHP Billiton and Xstrata, Cerrejon accounts for around 36 percent or 32 million tonnes of Colombia's annual output, and supplies power generators mainly in Europe. "Force majeure has been declared on at least some of these vessels. As long as the strike continues we are unable to comply with our obligations to customers," he said. "No-one knows how long the strike will continue and we are in discussion to reschedule shipments." Force majeure allows a company to suspend contractual obligations in the face of unexpected events including strikes and natural disasters. A market source said that Cerrejon had declared force majeure on about 600,000 tonnes of coal, effecting end-users in Spain, the United States, Canada, and Turkey among others. Preliminary talks between unions and management stalled at the weekend, thwarting attempts to negotiate a deal on wages and benefits. No new talks have been scheduled. Port data seen by Reuters shows utilities including Germany's Steag, Britain's Scottish and Southern Energy, and Sweden's Vattenfall as customers for 15 ships that were scheduled to load at Puerto Bolivar between Feb. 7-18. Some of those vessels have now set sail away from Latin America, according to shipping data tracked by Reuters, possibly in search of other cargoes after declaration of force majeure, said a coal analyst with a trading house. A loading ban at Colombia's second-largest exporter, Drummond, imposed on Feb. 6 due to an environmental issue, means that utilities won't be able to pick up alternative supplies from Colombia's other main coal port, another trader said. Drummond International, an 80-20 joint venture with Japan's Itochu Corp, has not declared force majeure, according to a source close to the company. DEMURRAGE COSTS CMC's Gatiss said he could not comment on whether buyers or sellers will ultimately have to pay the costs of chartering a ship while it is unable to take delivery. "Each sales contract has slightly different terms," he said. So-called demurrage costs could amount to $10,000-20,000 a day, coal shipping sources said. Prices for physical coal delivered into northwestern Europe for March bid at $88.25/tonne on Tuesday, up from $87.10 at the close on Monday and around $2 higher than before the strike. Traders, however, said plentiful supplies from the United States, Russia and South Africa, and weak demand for electricity in Europe, have averted major tightness in the market. The majority of Colombia's coal goes to United States and Europe, but the industry has increasingly looked to diversify into Latin America and Asia given planned shut-downs of coal-fire plants in its main destination points. Colombian coal exports fell 4.7 percent in 2012 to 77.4 million tonnes from 81.2 million tonnes in 2011 hit by labor disputes while the value dropped 7 percent to $7.8 billion, according to statistics agency data published on Monday. The sector faced a series of strikes last year at its main coal railway and a mine owned by Glencore's Prodeco unit. This year, the rail line, known as Fenoco, has been ordered to stop running trains at night through the northern Cesar province to allow residents to sleep. Fenoco's shareholders include Drummond, Glencore and a Goldman Sach's affiliate. The ban effectively cuts shipment of a quarter of coal output from Cesar, Colombia's largest coal-producing region.
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