Colombian coal miners prepare for government control on operations amid droughts

The Colombian coal mining industry expects the country's government to soon implement controls on mining operations in the La Guajira department that may reduce capacity due to recent droughts, market sources said July 7.

The Colombian government previously declared a national economic and social emergency in the department in the north of the country on June 30 due to recent droughts. The area is currently facing warnings of unprecedented drought and malnutrition, Colombian President Gustavo Petro announced in the declaration to state-owned media.

So far in the week ended July 7, nothing specific had yet been reported as to government controls on mining activity, according to sources. Some sources said the market will have to wait and see the impact this crisis will have on coal supply.

However, a US-based coal trader said Colombia's president has blamed water shortages on miners before, and thus the industry is expecting controls. This potential drought may not negatively impact coal supply, however, according to a Colombia-based trader.

"Causes cited [for the state of emergency] are malnutrition, inequality, water availability and El Niño," the Colombia-based trader said. "For a lot of local observers, the decree has no real support and likely will be battled in court. In the meantime, Cerrejón is in state of alert waiting to see how the measures to be announced could affect them."

The Glencore-owned Cerrejón coal mine is based in the La Guajira department and is one of the largest surface coal mining operations in the world, according to market sources.

"[The] Cerrejón [mine] secures, treats and manages the water it needs from its operation," the Colombia-based trader added.

Cerrejón declined in requests for comment on the situation.

Platts, part of S&P Global Commodity Insights, assessed the FOB Colombia 6,000 kcal/kg NAR 90 days at $105/mt on July 7, down $5 on the week from $110/mt on June 30, when the government degree was announced. On a year-on-year basis, the July 7 price was 64% lower, according to data from S&P Global.