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Feb 8, 2013

Workers strike at Colombia's top coal exporter

Union, Cerrejon disagreed on compensation and benefits
By Jack Kimball
    
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BOGOTA (Reuters) — Workers at Colombia's largest coal exporting company Cerrejon began a strike on Thursday, the first in more than two decades, after the two sides failed to reach an agreement during last-minute talks on wages and benefits.

The dispute adds to problems in the Andean nation's coal industry, which is facing an environmental inquiry into Drummond, the second-largest exporter, and a dispute at a mine owned by a Goldman Sachs Group Inc affiliate.

In total, about 85 per cent of Colombia's daily coal production will be shut down as a result of the sector's recent problems, according to calculations by Reuters and industry sources.

"At 3 p.m. exactly, the strike began," Orlando Cuello of the Sintracarbon union told Reuters.

Cerrejon said the strike would cause the economy to lose about US$3 million daily.

"For Cerrejon, Sintracarbon's decision to launch a strike is unfounded and irresponsible," it said in a statement.

"After a thorough analysis of the arguments raised by union leaders, both at the negotiating table and in their public statements, Cerrejon is not clear on what are the real motivations that led them to order the cessation of activities."

Labourers at Cerrejon, a joint venture between BHP Billiton , Anglo American and Xstrata, voted on Jan. 29 to strike. By law, however, they could not walk out on the first or last of a 10-day window, which will end on Friday.

During the previous wage talks in 2011, Cerrejon and the union were able to reach agreement. The last time Cerrejon workers carried out a strike was in 1990.

Prices for coal delivered into northwestern Europe moved up slightly on Thursday as did near-term swaps on concerns about supply from Colombia.

"Very serious ... We hope that the strike isn't long because it has a major impact on the country, on production, on the mining part of GDP. We hope for a speedy solution to the issue," Maria Constanza Garcia, head of the government's National Mining Agency, said in the coastal city of Cartagena.

Drummond suspension

Ten years of U.S.-backed military operations against leftist rebel groups have opened up large swathes of territory to new investment and helped secure areas where exploration and production were already in progress.

Like other commodity-exporting countries, Colombia has faced increased environmental and social demands, which some analysts say have replaced guerrilla activity as the main risk for mining investors in the world's fourth-largest coal exporter.

The coal sector faced a series of worker disputes last year, including a strike at the country's main coal railway, that dragged down growth in the third quarter as stoppages bit into exports and regional economies.

On Wednesday, Colombia suspended loading at Drummond's port after a coal barge nearly sank in bad weather last month, a government agency said. The suspension will be lifted once Drummond presents a contingency plan.

Drummond Ltd. vowed on Thursday to take "corrective" measures at its Caribbean port.

Drummond, which is 20 per cent owned by Japan's Itochu Corp , produces about 80,000-90,000 tonnes per day from its mines in the northern Cesar province. The company will also hold wage discussions with workers later this year.

Nearby, Goldman Sachs affiliate Colombian Natural Resource's La Francia thermal mine has remained shut since late January due to a pay dispute with the operator, union officials said.

The mine produces around 10,000-20,000 tonnes per day.

Nationally, Colombian production is around 220,000-250,000 tonnes daily.

Latin America's fourth-largest economy wants to boost coal output this year to around 98 million tonnes mainly due to expansion projects at Cerrejon, Drummond and Glencore.

Garcia of the mining agency told Reuters that Colombia produced 88 million tonnes of coal last year, up nearly three per cent from the previous year, but about four million tonnes below the 2012 goal. Official data will be published in coming weeks.

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