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Strike at Colombia's Cerrejon coal complex grows more likely as talks deadline nears

Highlights

Second round of negotiations to end March 6

Colombian coal into China heard traded at $50/mt FOB

London — As a month of negotiations between Colombia's primary coal producer, Cerrejon, and its largest miners' union, Sintracarbon, draws to a close, the union said Wednesday it will "resort to the legal mechanism of a strike" if no agreement is reached by the extended deadline of March 6.

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With the first round of negotiations ending February 15 without agreement, talks were extended for an additional 20 days from that date after Sintracarbon rejected Cerrejon's first counteroffer over workers' benefits and pay earlier this month.

"They must understand that the workforce will not accept in any way the company's intention to freeze, reduce or eliminate any benefits already enshrined in our collective agreement," a Sintracarbon representative said.

If both sides fail to reach an agreement after the second round, there will be a 10-day period in which union leaders will instruct their members to vote for a strike.

One Europe-based trader said announcing a potential strike is a "strong negotiating tool" on the union's part as it puts pressure on Cerrejon, and that there is still time to reach a compromise.

"After the second round finishes there is still time to negotiate before the zero hour of the strike is declared; an agreement has been reached in previous negotiations during that particular period," the trader said.

Earlier this month Sintracarbon formally rejected Cerrejon's offer of a pay increase equal to inflation in 2019 of 4% and said in a statement last week that the company was trying to erode working conditions in the mine.

The union also said Cerrejon's proposal aimed to freeze miners' incomes and benefits "at 2019 levels" for two years and said the company had denied fixed-term contract workers permanent job security.

A source from Cerrejon told S&P Global Platts that at present, production at the mine was operating "as normal" and said before any strike were announced there would be "other stages" of negotiation before a strike could be called.

"Cerrejon are struggling to accept the union's offer -- the usual thing -- but this year the situation could indeed deteriorate because current prices are so low" a Europe-based trader said.

Market sources had reported a trade for 6,000 kcal/kg NAR Colombian coal into China at $50/mt FOB, in-line with Platts most recent assessment and just $4 higher than the multi-year lows hit at the end of 2019.

The Cerrejon mining complex employs 12,000 people and is operated by BHP Group, Glencore and Anglo American, which hold equal stakes.

The mine exported 26.3 million mt of coal in 2019, and produces around 2.2 million mt a month, according to the company's own production data.