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European coal swaps rise sharply as Colombia blocks Drummond’s ship-loading activities

09 Jan 2014 11:12:13 | csd

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The Colombian government late on Wednesday banned US-headquartered coal producer Drummond from loading coal at their port until their legally-required direct ship-loading infrastructure is in place.

The ministry said Drummond must stop loading operations within the next five days so any coal already on the barges or at sea can be loaded and shipped, rather than left in the port.

In 2013 Colombia imposed a law requiring all coal producers to build direct ship-loading infrastructure in their ports by 1 January 2014 or risk losing their ship-loading licence. Drummond invested €350m in the infrastructure but fell behind with the works after 75 days of strikes. The company said in December the infrastructure will be completed in March 2014 at the latest.

In the last three months of 2013 the coal market was rife with rumours over whether the government would go ahead with the legislation – and risk losing the export fee revenues – with participants largely expecting Drummond would be allowed to continue with the loading.

In December, the Colombian environment ministry said that Drummond would be able to continue to load ships without the necessary infrastructure but would be charged a daily fine for breaching the law. As a result of this decision, financial and physical coal prices in the Atlantic basin plummeted below $80.00/tonne over the past couple of weeks.

However, on Wednesday, Colombian president Juan Manuel Santos, instructed the country’s environment minister Luz Helena Sarmiento to take any action required to protect the environment. His statement was followed up by a press release by the Ministry of environment suspending Drummond’s ship-loading activities until their infrastructure has been completed.

“We know this is a very costly decision for the country, but in addition to environmental and social issues, the institutional credibility of Colombian authorities is also at risk. The law is for everyone. And our duty as a government is to enforce it,” Sarmiento said in the press release.

No physical DES ARA deals were reported to ICIS by 10:30am London time on Thursday, however, the February ’14 CIF ARA financial contract was seen trading at $84.40/tonne at 10:32am – up $3.40/tonne from Wednesday’s close at $81.00/tonne. Manca Vitorino

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