Colombian coal giant Cerrejón says its industry is in terminal decline, and the company is suffering. The grim outlook doesn’t bode well for Colombia.
The CEO of Colombian coal giant Cerrejon — jointly owned by BHP Group Ltd, Glencore Plc and Anglo American Plc — isn’t sugar-coating anything. The industry, he says, is in terminal decline, and the company is suffering. Prices slumped, a drought hampered operations, and his mine is on the wrong side of the Panama canal.
“The large impact we foresaw from the market disappearing, we always saw as out there in the future,” Fonseca said during an interview in Bogota. “Well, the future is now.”
While coal demand remains strong in Asia, it’s withering in North America and Europe as power generators turn increasingly to cheaper and cleaner natural gas, wind and solar power.
That’s particularly hard for Cerrejon, which sells much of its coal to Europe. Fonseca projects demand from some countries in the Atlantic market may fall another 50% to 60% over the next five to seven years.
Fonseca’s grim outlook doesn’t bode well for Colombia. Coal is the nation’s biggest export after oil, and Cerrejon operates one of its largest mines, a sprawling and terraced open-pit operation near the Caribbean coast, Bloomberg reports.
Fonseca is telling the government, unions and local communities that Colombia has a limited window of opportunity to make the most of its vast coal resources while there are still buyers.
The biggest global bright spot for coal is Asia, where China and India are still building coal-fired plants. But it’s not an easy region for Cerrejon to serve. For one, shipping costs from Colombia make it hard to compete with mines in Australia and Indonesia. Plus, Cerrejon’s mine is near the Caribbean coast. So ships would need to cut through the Panama Canal or around Cape Horn.