Strikes have caused Colombia’s forecast coal output for 2013 to drop, according to local media reports on Tuesday, putting a dent in the country’s second most exported commodity after oil and cutting off royalty incomes.
“The labor scene has been very strong and it determined production [output] and targets for the sector this year,” Executive Director of ANDI Asomineros Eduardo Chaparo told financial newspaper La Republica.
Of an expected 94 million tons of coal destined for export in 2013, the Ministry of Mines and Energy reportedly revised down the projection to a more likely 82 million tons.
Drummond Co. and Cerrejon, Colombia’s two largest coal miners, have experienced long periods of under-productivity this year after large unionized bodies of workers staged strikes demanding higher wages. The bargaining gridlock temporarily shut down operations at Cerrejon for nearly a month in February. Roughly 10,000 or 50% of Drummond Co.’s workers were on strike for over 50 days.
A controversial ruling issued by Colombia’s Ministry of Labor ended Drummond Co.’s strikes, sending 10,000 workers back to the mines. The ruling is an arbitration tribunal where the Colombian government possesses the constitutional right to end a strike if it has exceeded 60 days.
Union Vice President Edgar Muñoz told Colombia Reports that his Sintraminenergetica union will comply with the ruling even though he believes it violates the constitutional right to worker organization and collective bargaining between union and employer.
The strikes at Alabama born-and-raised Drummond Co. had lasted 52 days at the time the government called the arbitration tribunal on September 13th. Workers have struggled to negotiate an increase in pay, a fixed salary instead of hourly wages, and better work conditions on top of other demands.
The company stuck to an offer of a 5% pay increase plus a sign-on bonus, a compensation package it says is high compared to the industry standard.
Colombia derives royalties from companies like the US-based Drummond Co. and UK-headquartered conglomerate Cerrejon. Paralyzed coal production in the Northern coast region of the country is likely to strain royalty payments that the Colombia state expects.
In the first trimester of 2013, La Republica reported that Colombia failed to receive more than $100 million in royalties and taxes from the two coal producers.
An end to the strikes at Drummond Co. should come as a relief to President Juan Manuel Santos, who has struggled to keep the fabric of Colombia’s economy from fraying amidst strikes in the agriculture sector, and by truck drivers and teachers, who have protested against the government’s economic policies.
Drummond Co., whose operations returned to normal on Monday, is responsible for one third of coal exports from the 4th largest coal producing country in the world. Coal production, Reuters estimates, accounts for 2.4% of Colombia’s GDP.
Cesar Diaz, President of the Colombian Chamber of Mining, estimates that losses in royalty payments to the state could exceed $150 million, and added “that means less resources for the departments [of Colombia]. In the end, it’s the country who loses.”