Colombia cuts 2012 coal output goal on labor strife-official

Fri Oct 19, 2012 8:28pm IST

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* Strikes, rebel attacks have affected output

* Colombia is world's No. 4 coal exporter

By Carlos Vargas

CARTAGENA, Colombia, Oct 19 (Reuters) - Colombia has lowered its coal production target for this year by 4 percent due to a nearly month-long strike at the country's main railway and low prices for metallurgical coal, a senior mining official said.

The coal sector in Colombia, the world's fourth-largest exporter of the material, has hit historic highs in both investment and production in the last few years on better security and fiscal terms.

But labor strife has forced the Andean nation to lower its production goal to 93 million tonnes in 2012 from a previous target of 97 million tonnes, said Henry Medina, deputy mining minister. Colombia produced 85.8 million tonnes last year.

"There's going to be a very good increase but not what was planned due specifically to the stoppages that happened in Drummond, Prodeco and Fenoco. That's going to reduce output," Medina told journalists Thursday evening at a conference in Cartagena.

Workers at Colombia's main railway, Fenoco, went on strike earlier this year for 25 days, paralyzing exports from Colombia's main coal-producing province of Cesar. [ I D:nCOCOAL]

Fenoco transports coal for Drummond International , Goldman Sachs affiliates and Glencore International Plc's Prodeco unit.

"The other impact was the price of coal this year, mainly metallurgical. It's been low and that is affecting coal production in the country," Medina said.

Metallurgical coal prices have plummeted this year as the global steel industry grapples with weak demand and falling prices. Metallurgical coal is used to make steel.

Hundreds of thousands of tonnes of Colombian metallurgical and pulverized coal have not made it to the market due to l ow prices, high production costs and the firming peso currency as producers scramble to sell cargoes, industry sources say.

While the Fenoco walkout ended after the company scored victories against the workers in court, another strike at Prodeco's La Jagua mine has dragged on for about three months.

After failing to come to an agreement, union officials said they are only waiting for the labor ministry to request the two sides go to an arbitration tribunal and lift the walkout.

The Andean nation's thermal coal sector is dominated by major producers such as Glencore, Drummond and Cerrejon, which is jointly owned by BHP Billiton Plc, Anglo American Plc and Xstrata Plc.

The metallurgical sector, however, is made up of small miners in central provinces that sell to larger companies for export.

This year, Colombia's mining industry has also faced increased attacks by Revolutionary Armed Forces of Colombia (FARC) rebels despite Bogota sending thousands of additional troops to protect the sector.

The government and FARC guerrillas started a peace process this week aimed at finding a negotiated end to the five-decade-old conflict, but in the first sign of discord, rebel leader Ivan Marquez slammed foreign oil and mining interests.

The bearded and bespectacled Marquez specifically called for production halts at Cerrejon and Drummond, the country's two top coal exporters.

Colombian President Juan Manuel Santos' administration has ruled out talking about foreign investment in the negotiations.

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