Colombia’s coal production may decline this year because of low prices, said Juan Camilo Nariño, the new director of the Colombian Mining Association (ACM).
Thermal coal prices are at levels that make production from some mine pits unprofitable, Nariño said last week on the sidelines of a mining event organized by the Ministry of Mines and Energy. He projected output could fall below 84mn metric tonnes this year from 84.3mn t in 2018 if prices hold.
The country produced around 42mn metric tonnes of steam coal in the first half of the year, roughly in line with 2018 levels.
But, “if prices continue as they are, production can be affected a lot in the next six months as some pits are not competitive with current prices,” Nariño said.
Argus assessed prompt two-month shipments of for NAR 6,000 kcal/kg Colombian coal at $49.25/t fob Puerto Bolivar on 26 July, down from $79.75/t at the end of last year.
Nariño said ACM is studying ways to gain market share in Asia as demand from Europe continues to dwindle. This includes trying to find ways to improve logistics and costs so that Colombian coal can better compete with production from Australia and South America.
ACM’s forecast is more optimistic than some analysts. Jaime Correal, research director at JCF Energy and Mining consulting, projects Colombia’s steam and coking coal production will decrease by 4.7pc this year to around 80.3mn t. Thermal coal production will fall to 75.5mn t from 76.6mn t while coking coal will drop to 4.8mn t from 7.23mn t.
Correal expects exports to fall to 70mn t this year from 81.7mn t in 2018.
Glencore’s Prodeco unit may have the sharpest decline in international shipments, Correal said. The company exported 3.07mn t of steam coal from January-May, which was 39.6pc less than in the same period of 2018. If shipments continue at that pace, Prodeco’s exports will drop to 7.37mn t this year from 11.9mn t last year.
“The only company that has market discipline is Prodeco,” Correal said. “This is the company that is producing at the lowest levels in a bid to not impact prices more.”
Correal expects Drummond’s exports to fall to 31mn t in 2019 from 32.7mn t last year. He based that on shipments for the first five months of this year.
Drummond’s exports rose in June, which brought shipments for the first half of 2019 to just under 16mn t, according to official company figures. That was 0.2pc less than in the same period of 2018.
Correal expects expects Cerrejon to trim exports to 27.7mn t this year. That is slightly above the 27.6mn t that the company’s president, Guillermo Fonseca, said Cerrejon will produce this year.
Cerrejon last week revised downward its coal production target from an initial 30.7mn t, as extreme dry weather in La Guajira province has forced temporary production halts at some pits. Fonseca also warned workers that the company could close mining pits because of low prices.
Production costs at Cerrejon, already considered one of the most efficient coal operations in the world, range between $35-$40/t, but the geological structure of some deposit makes it more difficult to keep reducing mining costs.
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- On July 30, 2019