Colombian coal firms shipped 15pct of output to Asia in 2010

Friday, 04 Mar 2011

Reuters reported that Colombia's largest coal exporters, Cerrejon and Drummond, shipped 15% of production to energy hungry Asian nations in 2010.

Colombia, among the world's top producers of high quality thermal coal and the No 5 coal exporter, saw a dramatic increase in exports to China in 2010 due to a demand slump in its principal market, Europe, and strong Asian appetite for the material.

Mr Howard Gatiss, head of CMC Coal Marketing Company, the sales arm for Cerrejon, Colombia's largest coal exporter, said that "Last year there was an extraordinary development in that for the first time more than 15% of our coal went to Asia. The European market was depressed, European prices were low and there was a real demand pull from a number of countries in the Pacific which was not able to be met by Australia, Indonesia or even South Africa."

Cerrejon, a JV between BHP Billiton, Anglo American and Xstrata, exported 31.5 million tonnes in 2010. Its mines have a capacity to produce roughly 32 million tonnes annually.

Analysts do not believe the destination make up of Colombian coal exports will shift dramatically in the coming years but Asian demand for Colombian material will likely continue and be determined mainly by freight rates.

Privately held US miner Drummond also said that it shipped 15% of its around 22 million tonnes of exports to Asia in 2010.

Mr Augusto Jimenez president of Drummond Colombia said that "In 2009, we didn't export to Asia, but in 2010 we started exporting to Asia, principally China."

Mr Jimenez also said he expected Drummond, which is eyeing selling part or all of its Colombia operations, to export 25 million tonnes in 2011.

Traders said that Colombian coal shipments to China depend on the ups and downs of freight rates, and whether China takes its material is the most important influence on European prices in a market increasingly prone to violent price swings.

Mr Gatiss said that "There was a significant volume of coal that went east, mainly on small capsize vessels and mainly all the way around, only a couple of vessels went through the Panama Canal. It's not clear what that means for the longer term trade. It is clear that the massive part, perhaps almost all the demand growth of thermal coal in the years to come is going to be in the Pacific."

Analysts said that although still way behind Europe and the United States as a market, China's imports of Colombian coal soared 26% to 3.7 million tonnes last year compared with 2009. 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.

Mr Gatiss said that "It doesn't seem likely that this will be a solid, long term, core part of the portfolio, then again, I would have said this time last year that I wouldn't have expected 15% of our production going to Asia."

(Sourced from reuters)