UPDATE 2-Colombia halts coal loading by Drummond, disrupting exports

Wed Jan 8, 2014 6:54pm EST

By Peter Murphy and Nelson Bocanegra

BOGOTA Jan 8 (Reuters) - Colombia on Wednesday suspended the loading of coal by U.S.-based miner Drummond until it complies with new regulations governing port operations, an action that would slash shipments from the world's No. 4 coal exporter by a third until around March.

The decision marked a U-turn by the government after it said last month it would fine Drummond - the country's second-biggest miner of coal - on a daily basis from Jan. 1 when the new regulations took effect but not stop it from loading coal.

New rules require coal exporters to use conveyor belts that stretch far offshore to load ships and abandon the polluting method of using barges and cranes from which dust and lumps of coal fall into the sea. But Drummond says it won't have the necessary infrastructure in place until March.

"The national government has made the determination to suspend loading of coal until the direct loading system is put in place," Environment Minister Luz Helena Sarmiento told reporters in the northern coastal city of Santa Marta after visiting Drummond's privately owned port nearby.

"This decision announced today is to be adhered to immediately," said Sarmiento, adding that barges already loaded would be permitted to make their way out to waiting ships for the next five days.

Drummond's local press office said the company may make a statement later on Wednesday.

Steam coal prices had risen ahead of the announcement. Coal for February delivery at the European terminals of Amsterdam, Rotterdam and Antwerp was up $3.60 in afternoon trading from the previous settlement at $84.75 by tonne.

Colombia is the world's fourth-biggest exporter of coal, most of which is consumed in power stations.

U-TURN

Though in December the government had emphasized the importance of avoiding disruption to coal exports, Colombia's second most valuable commodity, its discourse changed abruptly on Wednesday, possibly in light of negative press coverage Drummond's ability to flout the new regulations has generated.

"In Colombia you have to comply with the law," Sarmiento said.

"We know it is a very costly decision for the country, quite costly in terms of royalties, but what is at stake are the social and environmental systems of the country. If we don't do it we would lose credibility," Sarmiento told reporters.

Drummond produces roughly a third of Colombia's coal and pays the government some 4.2 billion pesos ($2.17 million) a day, about 2.7 billion pesos of which is royalties and the rest made up of other taxes.

Colombia's President Juan Manuel Santos plans to stand for re-election in polls set for late May and any perceived leniency in dealings with foreign companies flouting local laws may have been damaging when campaigning gets under way.

His mining minister, Amylkar Acosta, echoed Sarmiento's comments in a separate statement before the suspension was announced.

"Before everything else comes environmental sustainability," Acosta said.

The government first announced it would impose a switch to automated loading about seven years ago. The biggest coal miner, joint venture Cerrejon, is unaffected as it has used conveyor belt loading from its outset in the 1980s.

Sarmiento said any decision by Drummond to lay off or suspend workers at the port that may result from Wednesday's decision, would require the prior approval of the Labor Ministry.

Workers' union Sintramienergetica which led a seven-week strike at the company last year says hundreds of workers are employed at the port, many of whom are expected to be transferred to other positions or made redundant when it eventually switches to automated loading.

Coal is Colombia's most valuable commodity after oil and accounted for 11 percent or $5.9 billion of the country's exports between January and November of 2013, the latest data available show.