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Colombian coal workers strike

World Coal,

Workers at Colombian operations of US coal miner, Drummond Co., have gone on indefinite strike, Reuters reported. The move is set to cut Colombia’s coal exports by an estimated third, raising prices of coal globally.

Negotiations between Drummond and the Sintramienergetica union, over pay and proposed job cuts, have been ongoing for several weeks. The strike began after the two parties failed to reach an agreement.

The Sintramienergetica union represents roughly half of Drummond’s 10,000 strong Colombian workforce. The US coal miner has two coal mines and a port in the Andean country.

Failed negotiations

The union has demanded a 9% pay increase with smaller inflation-linked increments in subsequent years. In a statement released by Drummon hours before the strike began, Drummon claimed its latest offer to the union was 4.75% for the first year, with a one-off bonus of US$ 3700.

“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 subsequent years,” Drummond’s statement said.

However, Drummond’s proposals did not match the union’s expectations. Speaking of the strike, Edgar Munoz, vice-president of Sintramienergetica, said “it is indefinite. Unfortunately [Drummond] wouldn’t budge. It’s a pity.” Munoz said the union remained open to dialogue and suspend the strike, if Drummond improved its offer.

The result of the strike means that all Drummond’s output from Colombia will be shut off. Stocks at Drummond’s port will face difficulty in being shipped, since port workers are part of the strike action.

Further strike action

Colombia’s coal industry faced strike action and disputes between coal companies and unions earlier in 2013. In February, workers at Drummond’s rival coal miner, Carrejón, walked out after months of negotiations. Carrejón was forced to declare force majeure on many of its cargoes.

Under Colombian law, strikes can last for up to 60 days before the matter is taken to an arbitration tribunal, which will automatically lift the strike.

Peaceful protest

Munoz said workers involved in the strike action were setting up camp in front of Drummond’s installations, where they are set to remain for the duration of the action.

“The strike has begun calmly and peacefully,” Munoz said, adding workers were stowing equipment and would agree a contingency plan with Drummond to preserve the company’s infrastructure.

While Drummond remains unmoved on its offer to the unions, Munoz remains open to negotiations. Munoz said Drummond’s pay offer came close to what the union would accept, but he said he did not believe the company would concede to union demands for a fixed monthly based salary plus hourly wage, instead of by-the-hour wages only.

A sticking point in negotiations has been the question of what is to become of 400 Drummond port workers, who are set to be laid off when conveyor belt loading begins at the port in early 2014. The union is hopeful all these workers can be offered alternative positions with Drummond, while the company has promised to retain 70%.

Colombian coal

A senior labour ministry representative from the Colombian Government attended last minute talks between Drummond and Sintramienergetica, highlighting the negative effects strike action would have on the Colombian coal industry. According to mining ministry estimates, a strike could cost the Colombian Government between US$ 1.1 million and US$ 1.6 million/day in lost revenue.

Drummond is Colombia’s second largest exporter of coal, producing around 30 million tpa. In January 2013, the company was forced to suspend loading at its port after bad weather almost caused a coal barge to sink. News reports at the time suggested that hundreds of tones of coal were dumped into the sea to prevent the sinking, causing Colombia’s National Environmental Licensing Authority (NELA) to revoke Drummond’s export license, pending further investigations.

The series of strikes in Colombia this year has had a significant impact on the country’s coal export industry. Colombia is the world’s 4th largest exporter of coal. While the country’s coal output is small compared to the US and China, it is a significant player in the seaborne or coal export trade, since both the US and China consume much of their own production for electricity.

Global coal prices

In the market for coal futures, AP12 futures for 2014 coal delivery traded at US$ 85.50/t on Tuesday 23rd July, up US$ 0.65 from the previous settlement.

Though the effect of the strike may cause global coal prices to rise, the effect will likely be minimal, as a result of a significant market oversupply. Weak demand for coal, and alternative supply from Russia, the US and South Africa fill the gaps caused by the lost Colombian coal.

Edited from various sources by Samuel Dodson

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