Asia demand to push Colombia coal to Europe-Cerrejon

Wed Feb 16, 2011 9:01pm GMT
* Port to close for routine maintenance for 20 days
* Asian demand to draw Colombian coal to Europe
* Firm to present expansion plan in next few months
By Jack Kimball

BOGOTA, Feb 16 (Reuters) - Colombia's largest coal exporter, Cerrejon, sees Asian demand propelling more Colombian coal to Europe and that demand will also keep prices at current
levels, the company's president said on Wednesday.

The overall trend for coal prices this year is upward but a series of price shocks is likely as the market reacts to supply disruptions and the sudden appearance and disappearance of
Chinese spot buying, analysts say.

"Long-term (the current price of coal) is relatively sustainable because of the dynamics of supply and demand in the world," Cerrejon President Leon Teicher told reporters.

"China, India, Asia (are) growing and taking a lot of the volume from South Africa and therefore leaving more space open for us in Europe," he said in Colombia's capital, Bogota.

Prices hit a peak of $130 a tonne early in January when sentiment after Australian floods sent prices to a 12-month high. An April Colombian only cargo was bid on Wednesday at $115.00 against an offer at $117.50.

Colombia -- one of the top producers of high-quality thermal coal -- saw a dramatic increase in exports to China last year although the main markets for Colombian material
remain the United States and Europe.

Neither coal exporters, analysts nor officials believe the destination make-up of Colombian coal exports will shift dramatically -- though the Latin American nation has also seen increased exports to Japan and South Korea.

Teicher said the company -- a joint venture between BHP Billiton (BLT.L: Quote), Anglo American (AAL.L: Quote) and Xstrata (XTA.L: Quote) --had sent less than half a million tonnes to Asia so this year.

Cerrejon and union workers signed a two-year compensation agreement earlier this month, avoiding a strike at a time when the company is trying to recover production following heavy
rains across the country last year.

Teicher said Cerrejon exported 31.5 million tonnes in 2010 but produced only 30.3 million tonnes. "We had intensive use of our inventories," he said.

The company still expects production to hit 32 million tonnes or the mine's nominal capacity in 2011, while Teicher also said he expected a shareholder decision on the mine's expansion plan later this year.

Canada's SNC-Lavalin Group Inc (SNC.TO: Quote) and a partner have been awarded the expansion contract for a project to boost output to 40 million tonnes annually.

"I have not yet presented the expansion project for shareholder approval," Teicher said, adding that he expected to do so in the "next few months".

Cerrejon will close its port for 20 days from around Feb. 20 for routine maintenance and clients have been advised, Teicher said. It plans to replace parts of the shiploader.
(Editing by Dale Hudson, sourced:ThomsonReuters)

Tags:Asia coal demand, Colombian coal, Europe, Cerrejon, coal exporters, coal prices, thermal coal, BHP Billiton, Anglo American Plc, Xstrata, SNC Group Inc., raw material, South Africa