Drummond declares force majeure over Columbian coal problems

Drummond Co. coal marketing affiliate Interocean Coal has notified customers that its coal exports from Colombia are subject to Force Majeure conditions as a result of the Colombian government’s decision to halt effective Jan. 13 all coal shipments from its operations within the country.

Alabama-based Drummond, which suffered from a two-month labor strike in 2013, said Jan. 10 that last year’s work stoppage caused a delay in the construction of its new port, which allows it a more efficient way to get this coal onto the seaborne market. Drummond added that it expects a conveyor system that loads ships directly to be ready in March of this year.

The notice to customers of Interocean’s declaration of Force Majeure, dated Jan. 8, reads: “We regret to inform you that Interocean must declare Force Majeure as a result of actions taken against Drummond in Colombia at our port in Cienaga. Drummond experienced a long and protracted labor strike last year, of almost two months, during which time all of its operations in Colombia were under Force Majeure. As a result of the strike and duration of its effects, the building of the fixed pier at Puerto Drummond was delayed. Drummond undertook intense talks and negotiations with the Colombian government to delay the implementation date of a direct ship loading system for three months to allow us to complete the construction. However, yesterday Drummond received notice that as of Monday night, January 13, 2014, the Colombian government will be closing the port until the direct ship loading system is completed.”

The letter said that this action leaves the company no choice other than to declare Force Majeure effective Jan. 13. “We shall continue our efforts and discussions with the Colombian government to explore alternatives for the port closure issue, but absent consideration of other possible alternatives by the government we anticipate loading will be suspended until March 2014. Should we have any updates to this time frame you will promptly be informed.”

The Colombia mining operations are covered under a 2011 joint venture deal between Drummond Co. and a subsidiary of Japan’s ITOCHU CorpThis operation includes: the Mina Pribbenow and El Descanso open-pit coal mines located in the Cesar Coal Basin near La Loma; Puerto Drummond, a deep-water ocean port on the Caribbean Sea near Santa Marta; and coal transportation and handling facilities. These operations produced about 25 million tons in 2011.

U.S. Energy Information Administration data shows this coal moving in the first ten months of 2013 to the Barry and Gorgas power plants of Alabama Power, and to the Lansing Smith plant of Gulf Power, all under contracts due to expire in 2013.  

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.