August 1, 2012 / 5:48 PM / 7 years ago

Drummond Colombia cancels coal cargoes, stocks running out

* Drummond to run out of stocks on Wednesday - sources

* Fenoco railway president resigns, to leave at end month

* Prodeco, Goldman Sachs unit trucking coal to ports

By Jack Kimball

Aug 1 (Reuters) - Drummond International, Colombia’s No. 2 coal exporter, has declared force majeure on at least three cargoes and will run out of coal stocks on Wednesday after a 10-day strike at the nation’s main railway shut off supplies, industry sources said.

End-users believe the price impact from the loss of prompt cargoes while the Colombian rail strike continues may start to be felt this week with force majeures in the world’s fourth-largest coal exporter giving surprise price-support to the over-supplied market.

“Drummond won’t have any coal from today,” an industry source said.

Colombian logistics sources said last week that Drummond may have to declare force majeure within a week unless customers agree to defer shipments due to dwindling port stockpiles.

A force majeure is a clause provided in contracts where buyers or sellers are allowed to renege on their commitment because of a situation that is beyond their control.

Drummond — whose Colombian coal operations are 20 percent owned by Japan’s Itochu Corp — did not respond to requests for comment.

On July 23, laborers at Colombia’s main railway Fenoco — which supplies up to 160,000 tonnes of coal to Caribbean ports daily — went on strike over pay and working conditions.

Fenoco’s shareholders include Glencore International Plc’s Prodeco unit, Drummond International and Goldman Sachs Group Inc’s Colombian unit.

Fenoco President Peter Burrowes told Reuters that he was resigning at the end of the month, but stressed that his resignation had to do with a previous job offer and not the railway strike.

Sources told Reuters on Tuesday that Prodeco, the country’s third-largest coal exporter, had declared force majeure on a case-by-case basis on less than five vessels due to the walkout.

Prodeco and a local Goldman Sachs’ unit — which the company bought from Vale earlier this year — have been using trucks to move some coal to their Caribbean ports, sources said.

Talks have hit an impasse over company demands that ten trains stuck on the tracks first be moved before any discussions and a union desire that workers fired in a 2009 strike, which lasted 27 days, be reinstated, sources said.

The company and workers have not met since Saturday, but meetings could pick up again in Bogota later this week, Burrowes said. The union did not immediately respond to requests for comment.

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