Market and product
Colombia Bans Coal Loading by 2nd-Biggest Producer Drummond
Drummond Co.’s shipments of coal from Colombia, Europe’s No. 2 supplier, to international buyersincluding Electricite de France SA are suspended until theproducer finishes mandatory port enhancements to avoid spills.
Drummond, Colombia’s second-biggest producer, was orderedto stop loading ships at its Caribbean port until a conveyorbelt system replaces the current arrangement of barges andcranes, Environment Minister Luz Sarmiento yesterday toldreporters in the city of Santa Marta. Drummond estimates itsdirect loading system will be in place by March.
“We know this is a very costly decision from a royaltiespoint of view, but what’s at risk is the country’senvironment,” Sarmiento said. “If they don’t do thingsproperly, we’d prefer not to have this money, and they have tolearn that Colombia must be respected.”
Colombia, which supplies about one-fourth of Europe’s coalimports, introduced new rules Jan. 1 requiring producers to loadcoal directly onto ships. Other producers of Colombian coal,including BHP Billiton Ltd. (BHP) and Glencore Xstrata Plc, met thedeadline, while Drummond continued to load by barge this month.
Logistical obstacles will prevent Drummond from exportingcoal through other Colombian ports, Mines and Energy MinisterAmylkar Acosta said in a phone interview from Bogota. Drummondhas the capacity to store about one and a half months of itsoutput, Acosta said.
“Once this storage is full, they’ll have to haltproduction,” he said.
European Prices
Drummond will be allowed to load coal onto ships it has inbarges right now, a process which should take three or four daysto complete, Sarmiento said.
Drummond didn’t reply to a voicemail seeking comment afterthe port ban was announced. The Birmingham, Alabama-basedcompany’s press office didn’t return phone calls prior to theannouncement. EDF declined to comment in e-mailed response toquestions.
European coal prices rose yesterday after ColombianPresident Juan Manuel Santos, who’s bidding for a second term inoffice in May elections, sent Sarmiento to Santa Marta toinvestigate Drummond’s loading operation.
Coal for delivery next month to Amsterdam, Rotterdam orAntwerp rose 3.2 percent to $81.50 a metric ton yesterday, thebiggest increase since Oct. 24, according to broker datacompiled by Bloomberg.
Dumping Fine
Colombian authorities fined Drummond $3.6 million lastyear, after a sinking barge dumped about 500 metric tons of coalinto the Caribbean. The company will face another fine forviolating the new rules this month, Sarmiento said.
Drummond’s failure to meet new ship-loading rules has drawncriticism from lawyers and activists. The shipping suspensionfollows a 53-day miners’ strike over pay last year that promptedcoal prices to soar in Europe.
A further halt in exports “would be supportive of pricesbecause it will take supply out,” Trevor Sikorski, the head ofnatural gas, coal and carbon at Energy Aspects Ltd. in London.,said by phone.
Colombia is the biggest supplier of coal to Europe after Russia, according to the latest data from coal associationEuracoal. In past months, coal prices in Europe have been dampedby a global oversupply of the fuel. The surplus will swell by 20percent to 6 million tons this year, according to Credit SuisseGroup AG.
Colombia’s top producer Cerrejon, jointly owned by BHP, Anglo American Plc (AAC) and Glencore Xstrata Plc, has completed itssystem for direct loading of coal.
