Drummond coal stocks hit capacity over suspension in Colombia

Wed Feb 20, 2013 9:29am EST

* Nation's two main exporters unable to move coal
    * Drummond to reduce operations by three-quarters

    By Jack Kimball
    BOGOTA, Feb 20 (Reuters) - Colombia's second largest coal
exporter Drummond International will scale down
operations on Thursday as stocks reach maximum capacity after a
loading suspension by the government shut down its ability to
export.
    Colombia's top coal exporters, Cerrejon and Drummond, have
been unable to move the material since early February - Cerrejon
due to a strike and Drummond because of suspension after an
incident at its port.
    In a statement to employees dated Feb. 19, Drummond said it
will reduce the normal 24-hour operations by three-quarters
starting on Thursday and has asked the labor ministry for
permission to suspend some labor contracts.
    "Although the company keeps maximum levels of inventory at
train loading stations, at the mine and the port yards of 3
million tonnes, the current levels are higher than 4.7 million
tonnes," Drummond said.
    "Inventories at load stations are at peak levels and cannot
receive more coal from mining operations. Additionally, we have
more than 1 million tonnes in inventory at the pits that cannot
be transported to loading stations."
    Colombia's environmental licensing body suspended loading at
Drummond's port on Feb. 6, which will last until it reviews a
revised contingency plan from the miner after an incident where
bad weather forced a coal spill into the nearby waters.
    Drummond, which is an 80-20 joint venture with Japan's
Itochu Corp., said that it had presented the plan on
Feb. 15 and was waiting to hear back.
    The company expects coal output to rise to up to 31 million
tonnes in 2013 from a lower-than-expected 26 million tonnes last
year, according to an interview in local media in late 2012.
 
    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.
    Cerrejon's workers have been on strike since Feb. 7, the
first time in two decades, forcing the company to declare force
majeure on some cargos.
    Preliminary talks between unions and management stalled at
the weekend, thwarting attempts to negotiate a deal on wages and
benefits. As of late Tuesday, no new talks had been scheduled. 
    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 shutdowns 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.
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