The elevated cost of securing and transporting coal from Colombia’s interior region has prompted a major cement maker with coastal facilities to import coal and petroleum coke from the US.
The elevated cost of producing coal in inland Colombian provinces and trucking to coastal regions has led to an 11pc increase in fuel costs for Cementos Argos in the first quarter, vice president of the Colombian division Tomas Restrepo Perez said.
Cementos Argos had to pay as much as 200,000 Colombian pesos/t (US$62.50/t) for high-quality coal produced in the central provinces of Cundinamarca and Boyaca in March, said one producer that sells coal to the company. On top of that, the company had to add Ps120,000/t ($37.50/t) in trucking costs to bring coal to the Caribbean city of Cartagena, resulting in total costs of $100/t on average, he said.
To realign costs, the company took advantage of two spot opportunities in the first quarter, Restrepo Perez said. One was a purchase of Utah coal that shipped out of the Port of Mobile and another was petroleum coke from a trader — both for its Cartagena plant. But the company declined to disclose how much coal and petroleum coke it has imported, how much it plans to import, or the costs.
Cementos Argos imported coal with a heat content of 11,900-12,000 Btu/lb, according to people familiar with the matter. That is lower than the 12,500-13,000 Btu/lb quality coal supplied by Colombia’s inland provinces Cundinamarca and Boyaca.
Prices for coal from Colombia’s inland provinces have been elevated this year because of limited supply. Coal producers in the central province of Boyaca were not able to quickly respond when demand started to recover last year, director of the country’s coal federation Fenalcarbon, Luis Gabriel Chiquillo said. In addition, higher quality coal is being used to produce metallurgical coke.
But the company expects coal prices in inland Colombia to decline later this year and track international markets, which have fallen since the end of 2018.
“We are seeing less demand for this metallurgical coal and more mines being opened or enhanced for thermal coal. So it will take a little bit of time, but we expect the market to balance itself in the second half of the year,” Restrepo Perez said.
Restrepo Perez estimated that it will be about 22pc cheaper to use imported coal and petroleum coke than to use Colombian coal. More expensive Colombian coal lifted costs by $3.50/t in the first quarter. This additional cost is likely to fall to $2.50/t over the following three quarters.
Cementos Argos is Latin America’s fifth-largest cement maker, with total installed capacity of 23mn t/yr. It has cement and ready-mix concrete operations in Central America, the US and the Caribbean.
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- On June 6, 2019