Drummond Colombia strike more likely after talks yield nothing

Thu Jul 18, 2013 9:50pm EDT

* Further talks could follow but none scheduled

* Union leaders to meet labor minister on Friday

* Strike could cut Colombia coal output nearly a third

By Peter Murphy

BOGOTA, July 18 (Reuters) - Eleventh-hour talks on Thursday between U.S. coal miner Drummond and a workers union in Colombia have achieved nothing, a union leader told Reuters, making strike action at the country's No. 2 coal producer increasingly likely.

Unionized workers voted in favor of strike action on Wednesday after failing to reach an agreement with the company over pay and conditions but the sides held further talks on Thursday in an attempt to avert a walk-out. Drummond employs around 10,000 in the country.

"The negotiations didn't advance an inch. The company's position was the same," said Cesar Flores, negotiator for the Sintramienergetica union, adding that the union had still not ruled out further talks though none were scheduled.

The negotiations are being closely watched by the coal market which risks output from Colombia, the world's No. 4 coal exporter, falling by nearly one-third if Drummond's two mines and sea port are halted. With traders preparing to purchase stocks ahead of winter, relatively plentiful supplies on the market now could tighten in a prolonged stoppage, potentially pushing up prices.

A strike would also be a major headache for the government as it tries to stoke economic growth that was sluggish in the first half of the year, hit by a month-long strike in February at rival miner Cerrejon, a joint-venture between Anglo American Plc, BHP Billiton Ltd and Xstrata Plc.

Though no further talks had been scheduled with the company by Thursday evening, Flores said union leaders were scheduled meet privately with Labor Minister Rafael Pardo Rueda on Friday morning.

"The most sure thing will be that he will ask us not to strike," Flores said, though he did not have specific details on what was to be discussed or proposed at the meeting.

Sintramienergetica has demanded a pay rise of 10.7 percent for this year and smaller increments in subsequent years. Though Drummond's offer now stands at a 4.5 percent rise, the union's vice-president Edgar Munoz, said the sides were close to a deal on pay, indicating they would be willing to accept less.

Drummond has said union demands are beyond the reach of it and other mining companies. Coal prices have dipped this year and some analysts say they have fallen close to the cost of production for some smaller-scale producers at least.

Rates for coal destined for Amsterdam-Rotterdam-Antwerp (DES ARA) and for delivery in August last traded at $75.00 a tonne on Thursday, unchanged from Wednesday's late trading level, with 50,000 tonnes changing hands for that contract.

Munoz said that a thornier issue than pay was the fate of around 400 workers at Drummond's sea port, many of whom are set to lose their jobs once the company switches to conveyor belt loading of coal onto ships from early 2014.

Drummond said in a statement it would find other positions for some of those workers and offer a "withdrawal plan" to the others without specifying what this consisted of. The union, on the other hand, is demanding that all of those workers be retained.

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