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Bombs and strike threats hit Colombia's thermal coal sector
July 16, 2012 / 8:14 PM / in 5 years

Bombs and strike threats hit Colombia's thermal coal sector

* Strikes would have to last weeks to hit prices
    * Sector worried over possible railway walkout
    * Colombia is the world's No. 4 coal exporter

    By Jack Kimball
    BOGOTA, July 16 (Reuters) - Colombia's thermal coal industry
is suffering a spate of bomb attacks and strike threats which
may put at risk more than half of shipments from the world's
fourth-largest exporter of the material, industry sources said. 
    Any stoppage of Colombia's output, however, would have to be
prolonged to lift prices because both the Atlantic and Pacific
markets are over-supplied despite a strong coal burn across much
of Europe and steady imports into India and China. 
    A possible strike by workers at Fenoco railway - which
carries high-grade coal to Atlantic ports from mines run by
Drummond, Glencore's Prodeco unit and Goldman Sachs' Colombian
Natural Resources - could cut exports by about 50 percent. 
    There is also a chance of a walkout at Prodeco's Carbones de
La Jagua project over pay and working conditions after laborers
voted on July 7 to authorize a strike. Under Colombian law, they
have until Thursday night to strike or they must vote again.
    Fenoco laborers are paid less than workers at the companies'
mines and could join miners at La Jagua in any walkout,
paralyzing some of Colombia's major producers, the sources said.
    "Fenoco workers are taking advantage of the possible strike
at La Jagua. If La Jagua goes on strike, it won't be that big a
deal, but if Fenoco does, then that will be a problem," one
veteran industry source said.
    Fenoco President Peter Burrowes told Reuters the company was
"doing all that is possible" to resolve the issue, while the
union said talks had broken down. The Fenoco workers have until
Thursday July 26 to carry out the strike or must vote again. 
    Walkouts at La Jagua and Fenoco would likely have to last
several weeks to have an impact on prices, the sources said.
Global prices will probably remain stuck for the next six to
nine months, Bank Of America Merrill Lynch said on Monday. 
    Colombian producers usually keep around 5 percent to 10
percent of annual output as stocks at port and would use those
if walkouts happened, the sources said. Daily supply of coal to
the port via Fenoco is up to 160,000 tonnes. 
    "Waiting time at the ports is currently only 1-2 days. It
was up to 10 days before, so they could draw down port
stockpiles, which are quite decent now, and then it'd be more a
question of delays to loadings going back to 10 days, or some
waiting time, some demurrage," a European utility source said.
    "But there would be plenty of end-users who would welcome
being able to delay cargoes given the state of the market - it
would be easy to replace and probably at lower prices," said the
source, who buys from all the major Colombian exporters. 
  
    The Andean country has seen record foreign investment,
mainly into the oil and mining sectors, pushing coal output to
historic highs over the last decade after a U.S.-backed military
offensive drove rebels into remote jungle and mountain hideouts.
    Latin America's fourth-biggest economy has battled Marxist
insurgents for nearly five decades, and despite the security
crackdown, guerrillas have stepped up their attacks recently.
    On Saturday, the largest rebel group - known as the FARC -
blew up a section of the railway linking Cerrejon's mines to its
port in the northern Guajira province. 
    That followed a blast on the Fenoco line on July 5 in
neighboring Cesar province, whose coal production when added to
Guajira makes up all most all of Colombia's coal exports.
    Two years after President Juan Manuel Santos took office,
the resurgence of guerrilla attacks and a botched reform have
cut into his once-commanding approval rate, complicating
much-needed reform efforts. 
    "The bad thing is that these attacks are regularly
happening, like they did years ago," another source said.

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