Colombian Strike Forces Drummond to Call Force Majeure on Coal Cargoes

Mina Pribbenow mine, image courtesy Drummond

By Helen Murphy

BOGOTA, Aug 6 (Reuters) – U.S. coal miner Drummond Co Inc and striking workers in Colombia failed to reach agreement on Tuesday to end a 14-day work stoppage that stalled about one-third of the output in the Andean nation, the main union and company said.

Drummond, which has two mines and a port in Colombia, made an improved pay offer to the main union, Sintramienergetica, which represents about half of Drummond’s roughly 10,000 workers, but it was not enough to end the strike that began on July 23 after weeks of pay talks ended in failure.

Drummond had sought face-to-face talks with the three striking unions, but Sintramienergetica wanted to negotiate alone and rejected a written offer via the labor ministry, Edgar Munoz, the union’s vice president, told Reuters.

“There was no agreement because there was no direct contact made with the company,” Munoz said. “We won’t accept these sorts of negotiations.”

The union remains willing to seek an agreement with Drummond, he said.

Drummond met representatives of the other two unions, but Sintramienergetica “refused to participate,” the company said in a statement.

The company increased its offer to raise workers’ pay by 5 percent for the first year, from its earlier proposal of 4.75 percent. It also improved its offer for a one-time bonus to about $4,500 from $3,700 earlier.

Sintramienergetica has demanded a 9 percent pay increase with smaller inflation-linked increments in subsequent years.

“After about 60 days of talks and two weeks of strike, no agreement has been reached,” the company said.

“Drummond has taken into account the requests of union negotiators, the industrial standards and norms, the current conditions of the market and above all, the needs of our employees and their families … This is a very generous offer,” it said.

A major point of contention is the fate of 400 port workers, some of whom could be laid off when conveyor belt loading begins at Drummond’s port early next year. The unions want all those workers be offered alternative positions while the company had promised to retain 70 percent.

ECONOMIC IMPACT

Stocks at Drummond’s own port have not been able to ship, forcing the company to call force majeure on some cargoes since workers there were part of the strike action. Force majeure allows the suspension of contractual obligations due to unexpected events such as strikes.

The seaborne coal market is well supplied, but if the strike dragged on for months, it could reduce the surplus and push up prices in Europe, where much of Colombia’s supply is consumed and buyers are already booking in fuel for the winter.

Drummond produced 26 million tonnes of coal, or almost one-third of Colombia’s total output in 2012. Coal is one of the Andean nation’s biggest exports.

Though Colombian output is small compared with the United States and China, it is a major player in the seaborne, or coal export trade, since those countries consume much of their own production for electricity.

Colombia’s coal industry has had a turbulent year, with a month-long strike at rival miner Cerrejon in February and a temporary closure of Drummond’s port after an environmental incident in February.

Those events were a major factor behind slower economic growth in the first quarter of this year.

The government has also struggled to bring an end to a strike by artisanal and small-scale miners over the past month, some of whom blocked roads, demanding provisions be made for them within the country’s mining code.

Drummond had been expected to produce 32 million tonnes out of some 94 million tonnes of forecast national output in 2013, which would earn the nation about 900 billion pesos ($475.7 million) in royalties, the government has said, up from 700 billion pesos last year. (Reporting by Helen Murphy, Luis Jaime Acosta and Fernando Peinado; Editing by Gerald E. McCormick, Maureen Bavdek and Jan Paschal)

(c) 2013 Thomson Reuters, All Rights Reserved

Unlock Exclusive Insights Today!

Join the gCaptain Club for curated content, insider opinions, and vibrant community discussions.

Sign Up