Wage talks aim to end S.Africa gold, coal strikes

Mon Aug 1, 2011

By Ed Stoddard, Reuters

JOHANNESBURG (Reuters) - Striking South African coal and gold miners will meet the Chamber of Mines in separate talks on Monday in a bid to end stoppages that have cost Africa's largest economy tens of millions of dollars in lost output.

Coal workers have been off for a week while some 100,000 gold miners downed tools on Thursday, halting operations at AngloGold Ashanti, Gold Fields and Harmony Gold at a time when bullion is at record highs.

Gold's run has been driven by its safe-haven status amid the debt crises in Europe and America but analysts have said a prolonged strike in South Africa, the fourth-largest producer of the precious metal, could also support its price.

Spot gold was fetching $1,613.44 an ounce by 0523 GMT on Monday, compared with a record high of $1,632.30 on Friday.

The index of South African gold miners shed 5.4 percent last week, on investor concern about lost output even as the commodity rallied.

But South Africa's rand and bond markets have shrugged off the strikes, which have also hit the country's fuel, chemical and diamond sectors, and the gains they have achieved could be extended this week on the gold price and technical factors.

The rand was trading 0.49 percent firmer against the dollar at 6.6620 as of 0523 GMT.

The annual "strike season" is in full swing, with unions demanding 10-15 percent pay rises, well above inflation of 5 percent. A fuel strike that caused panic buying at the pumps ended last week, but when workers go back to their jobs in one industry, labour strife flares in another.

DIFFICULT POSITION

The strikes highlight the difficult position of the ruling African National Congress, which is keen to attract foreign investment but is in a governing alliance with organised labour.

Monday's talks were due to start at 0800 GMT. Negotiators have narrowed the gap on the gold front, raising hopes of more progress, though neither side is predicting a breakthrough.

"They have put something on the table and we are looking at that and consulting with our members and will come back on Monday to see if there can be some improvements in their offer," Frans Baleni, General Secretary of the National Union of Mineworkers (NUM), told Reuters ahead of the talks.

The NUM had sought a 14 percent pay rise and the gold mine companies had offered rises of 7 to 9 percent.

A new round of talks will also seek to end the coal miners' strike. Analysts have said if it persists for at least another week exports to Asia and Europe could be disrupted.

A prolonged strike could also choke supply supply to utility Eskom , which provides almost all of South Africa's power and almost exclusively runs on coal. Eskom has said it has around five weeks of stocks.

Coal firms affected include Anglo Thermal Coal SA, Exxaro, Optimum Coal and Xstrata Coal.

Markets on Monday will also be watching wage talks between unions and Impala Platinum, the world's second largest producer of the precious metal.

Impala and its larger rival Anglo American Platinumn, which is also engaged in negotiations, together account for around two-thirds of global platinum output, so strikes against them will almost certainly support the metal's price.

Peabody Energy, Rio Tinto, BHP Billiton, Xstrata and Anglo American have all declared force majeure in the region Queensland

Queensland floods in 2008 left steel producers with a threefold increase in annual contract prices to about US$300 a ton.
Queensland accounts for the majority of the premium hard coking coal supply on a global seaborne basis. Queensland is the biggest global exporter of coal used in steel production.
Collins Stewart believes the current situation is worse than the 2008 flooding, as more mines and transportation infrastructure have been affected this time. About 37% of the world’s traded coking coal has been affected, according to Macquarie.
Mines affected in 2008 took at least six months to recover from the disruption and return to full capacity. The cumulative loss of production is expected to maintain upward pressure on spot prices for several weeks.
Coal stockpiles at Gladstone harbor in Queensland are very low after flooding shut a rail network. Eighteen ships are waiting to load and 12 more are expected at the harbor in the next 10 days.
Meanwhile, Queensland coal miner Macarthur Coal stated on Wednesday that its now expecting first-half profit at the low end of its forecast range due to production issues.
Peabody Energy, Rio Tinto, BHP Billiton, Xstrata and Anglo American have all declared force majeure in the region, which means they won’t be able to meet contractual obligations due to unforeseen circumstances.
About 98 million tons of capacity to produce steelmaking coal is under force majeure, equivalent to 73% of Queensland exports.
Australia shipped 259 million tons of coal for steel and power in 2009, according to the World Coal Association.
Australia is the largest producer of coal used in steelmaking, contributing more than 40% of the global seaborne trade, according to Deutsche Bank AG. The country is the second-largest exporter of the commodity after Indonesia.
Coking coal suppliers traditionally hold annual talks with steelmakers to fix benchmark contracts for the 12 months from April 1.
Steelmakers may agree to monthly pricing for coking coal, as proposed by BHP, in the current environment rather than locking in US$300 a ton for a whole quarter, Macquarie says.
There will be a material impact on Australian exports of coking coal, even if no further rain falls, Morgan Stanley adds.
Flooding is also affecting thermal coal, used by power stations, driving the price of supplies at the port of Newcastle in Australia’s New South Wales, the benchmark for Asia, to the most in 27 months.
Prices jumped 3% to US$126.10 a ton in the week ended Dec. 31, the most since Oct. 2008.

BHP, Xstrata, Anglo Coal Operations Hit by South African Rains

By Carli Lourens
Jan. 6 (Bloomberg) -- BHP Billiton Ltd., Xstrata Plc and Anglo American Plc, already facing delays in coal shipments from flooding in Australia, said their South African operations are also being hit by unusually high rainfall.
“Heavy rains over the past few weeks have had an impact on coal production” in South Africa, BHP said in an e-mailed reply to questions today. Preparations before the rainy season have helped to reduce the effect on operations, the company said.
South Africa raised the flood-warning level for its central Orange River area today as water levels in places were expected to reach the highest since 1996. The country’s biggest dam, Gariepdam, is at 113 percent of “full” levels and the second- biggest, Vanderkloof, is 107 percent full, according to figures on the website of the government’s water department.
The national weather service forecast heavy rain, defined as more than 50 millimeters (1.97 inches), in the main coal- producing region of Mpumalanga province in the northeast.
“The recent high level of rain across the country and in particular in the Mpumalanga province have thus far had minimal impact,” Xstrata said in an e-mailed response to queries. “The rains have however had an impact on the poorly maintained roads in the area that could impact some coal logistics.”

Eskom Holdings Ltd., South Africa’s largest electricity supplier, said yesterday that the rains had reduced the amount and quality of coal supplied to four to five of its plants, curbing the company’s ability to generate power. Anglo American, one of Eskom’s largest coal suppliers, said by e-mail its Kriel colliery has been worst affected by the rains.
Opencast Affected
“Opencast mines were affected,” mostly at Kriel, though they are set up to handle heavy downpours, Anglo said.
Eskom Chief Executive Officer Brian Dames told reporters in Johannesburg today that disrupted coal supplies have heightened the risk of power outages in Africa’s biggest economy.
Record rainfall in Australia’s Queensland state has spread flooding over an area the size of France and Germany, disrupting coal mine and rail operations. BHP, Xstrata, Anglo, Rio Tinto Group and Peabody Energy Corp. are among producers to have declared force majeure, a legal measure allowing them to miss contracted shipments due to circumstances beyond their control.
Exxaro Resources Ltd. and Optimum Coal Holdings Ltd. declined to comment on the effect of rains in South Africa.
-Editors: Tony Barrett, Amanda Jordan,
Reporter on this story: Carli Lourens in Johannesburg at clourens@bloomberg.net