Wednesday, May 31, 2023

Colombia coal rail workers vote to end strike, union cries foul


(Reuters) – Colombian railway workers at the country’s main coal line voted on Monday to end a three-week strike that has paralyzed more than half of coal shipments from the world’s fourth-largest exporter, but the union called the vote illegal and has vowed to continue the strike.

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Striking workers at privately held rail company Fenoco have brought coal exports from the main producing province of Cesar to a halt, causing major coal producers to declare limited force majeure and costing the government more than $1.2 million per day in royalties.

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

Fenoco President Peter Burrowes told Reuters that 335 workers had voted in favor of lifting the strike, sending the dispute to arbitration, meaning that the company received more than the 51 percent required to end the walkout.

A total of 347 out of 624 workers cast ballots on Monday, Burrowes said. Laborers could return to work as soon as Thursday, according to the company.

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But the union — which has more than 200 members — said only union leaders could stop the strike and called on the company to make concrete proposals to end the walkout.

“We’re not going to lift the strike. We’re going to continue striking,” Felix Herrera, president of the Sintraime union, told Reuters.

Fenoco’s shareholders include Glencore International Plc’s (GLEN.L) Prodeco unit, Drummond International DRMND.UL and Goldman Sachs Group Inc’s (GS.N) Colombian units. In 2009, striking Fenoco workers held up exports for 27 days.

Fenoco is also trying to have the strike declared illegal, which would allow the company to fire union leaders. A court ruling is expected on Tuesday, but is likely to be bogged down in a months-long appeal process.

The dispute between laborers and the private company has pushed up prices despite the availability of coal in the Atlantic and Pacific markets, and while sentiment has become cautiously optimistic for firmer prices in the fourth quarter, the shortfall from Colombia has yet to be strongly felt, utilities and traders said.

Buyers of Colombian coal say if the strike lasts for the rest of the month, it would take 4 million metric tons (4.4 million tons) out of supply for this year, which the country would not be able to make up.

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That, plus supply cuts underway in the United States, Australia and Indonesia, will help rebalance the market and should push prices back above $100 per metric ton, but at that level, fresh U.S. offers are likely to emerge, capping any price gains, traders and utilities said.

Colombia’s second-largest coal exporter, Drummond International, said before Monday’s vote that it was sharply cutting production because of the rail strike.

“With the railway out of operation, coal exports have ceased and inventory at the mine loadout facility has reached full capacity,” Drummond said in a statement sent to Reuters early on Monday. The company could not be reached immediately for comment later on Monday.

“As such, Drummond, for an indefinite period of time, will be significantly reducing its operations in Colombia,” said the statement, dated August 10.

Drummond, whose Colombian coal operations are 20 percent-owned by Japan’s Itochu Corp (8001.T), said the walkout by rail workers was preventing shipment of 80,000 to 85,000 metric tons per day from its mines to its Caribbean port.

Drummond customers say the company has informed them that the miner’s workers in Colombia have been put on paid leave and that it has mined and moved all the coal it can while the vital rail link is offline.

Prodeco and a local Goldman Sachs unit, which the company bought from Vale earlier this year, have used trucks to move some coal to ports, but Drummond does not have the loading ability to move coal by trucks, industry sources said.

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