UPDATE 3-Drummond's Colombia coal miners go on unlimited strike

Tue Jul 23, 2013 11:43pm EDT

Related Topics

* Stoppage halts all Drummond Colombia output immediately

* Union would suspend strike if acceptable offer made

* Coal prices could rise at loss of 1/3 of Colombia coal

By Peter Murphy

BOGOTA, July 23 (Reuters) - Workers at the Colombian operations of U.S. coal miner Drummond went on indefinite strike late Tuesday, in a move set to cut output in the world's No.4 coal exporter by around a third and bolster prices.

Drummond, which has two mines and a port in Colombia, and the Sintramienergetica union, which represents about half of Drummond's roughly 10,000 workers, had been in negotiations for weeks over pay and upcoming job cuts among port workers.

"It is indefinite. Unfortunately the company wouldn't budge. It's a pity," Edgar Munoz, vice-president of Sintramienergetica told Reuters. He said the union remained open to dialogue and could suspend the strike if the company improved its offer.

A Drummond spokeswoman confirmed the strike and said all the firm's output from Colombia would be shut off as a result. Stocks at Drummond's own port would be unable to be shipped, she said, since workers there were part of the strike action.

Although the seaborne coal market is well supplied, a prolonged strike combined with upcoming stock purchases ahead of winter could puncture that surplus and push up prices in Europe, where much of Colombia's supply is consumed.

Drummond produced 26 million tonnes of coal, or almost one-third of the country's total output in 2012. Coal is one of Colombia's biggest exports.

One local coal source told Reuters he understood there was a ship at port which was 33,000 tonnes short of loading its scheduled 170,000-tonne cargo. It was not clear whether the union would allow it to finish loading and depart.

Though Colombian output is small compared to the United States and China, it is a major player in the seaborne or coal export trade since those countries consume much of their own production for electricity.

PICKET AT THE GATES

The union has demanded a 9 percent pay increase with smaller inflation-linked increments in subsequent years. In a statement hours before the strike, Drummond said its latest offer was 4.75 percent for the first year plus a one-off bonus of about $3,700.

"We are convinced that it is an excellent proposal, especially taking into account current low prices for coal in the industry and those expected in coming years," Drummond's statement said.

Prices for coal destined for Amsterdam-Rotterdam-Antwerp (DES ARA) and delivery in September traded around $76.20 a tonne on Tuesday, up $0.20 from the previous day's close, with 50,000 tonnes changing hands, as hopes for a deal dimmed.

That is 15 percent less than coal bound for the same destination a year ago, pressuring miners' margins and limiting Drummond's room for maneuvre in negotiations.

In the market for coal futures, API2 futures for 2014 delivery traded at $85.80 a tonne on Tuesday, up $0.65 from the previous settlement.

Munoz said Drummond's pay offer came close to what the union would accept, but he said the company would not concede to their demands for a fixed monthly base salary plus hourly wage, instead of by-the-hour wages only.

A major bone of contention has been the fate of 400 port workers, some of whom would be laid off when conveyor belt loading begins at Drummond's port early next year. The union has demanded all those workers be offered alternative positions while the company has promised to retain 70 percent.

Munoz said workers were setting up camp in front of Drummond's installations, where they would remain for the duration of the stoppage. The workers would rotate during the picket, enabling them to return home for some of the time.

"The strike has begun calmly and peacefully," Munoz said, adding workers were stowing valuable equipment and would agree a contingency plan with Drummond to preserve its infrastructure.

A senior labor ministry representative joined last-ditch talks on Monday and Tuesday, underscoring the high stakes of a strike for the government. A month-long stoppage at rival miner Cerrejon in February was one factor behind slower growth in the first three months of the year.

The government has also been confronted since last week with a strike by artisanal and small-scale miners, some of whom have blocked roads, demanding provisions be made for them within the country's mining code.

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