Drummond Colombia Coal Workers Vote to Strike Over Pay Dispute

Workers at Drummond Co., Colombia’s second-biggest thermal coal producer, could strike as early as July 20, after voting not to accept the company’s latest pay offer.

About 3,000 port and mine workers overwhelmingly rejected Drummond’s offer of a 4.5 percent wage increase, Sintramienergetica union negotiator Humberto Suarez said. Union leaders will study the company’s response before deciding whether to stop work, he said.

“We have the votes to strike, but we are waiting to see what the company does,” Suarez said yesterday evening, in a phone interview from Santa Marta.

A strike would cost the government between 2 and 3 billion pesos ($1.1 million to $1.6 million) per day in lost royalties, according to Mining Ministry estimates, and could act as a drag on the government’s attempt to reverse a slowdown in growth. Coal is Colombia’s biggest export after oil.

The government has called for a meeting with union officials today, Suarez said. The company did not immediately reply to an e-mail seeking comment sent outside normal business hours.

On July 12 Drummond offered workers a three-year pay deal of a 4.5 percent pay rise, followed by an increase of 1.25 percent plus inflation plus in the second year, then inflation plus 1.5 percent. Workers seek an increase of about 8 percent, union official Alberto Solano said July 12.

Exports from Drummond were interrupted in February, after the company’s loading license was suspended after a sinking barge dumped coal into the sea. On Feb. 7, workers at Cerrejon, Colombia’s biggest coal mine, which is joint-owned by BHP Billiton Ltd. (BHP), Anglo American Plc (AAL) and Xstrata Plc (GLEN) went on strike for more than a month in a dispute over pay and benefits.

Colombia’s central bank cited “paralysis” in the Andean nation’s coal industry in its decision to cut its benchmark interest rate half a percentage point to 3.25 percent at its March policy meeting. The Finance Ministry estimates that the slump in coal output cut first quarter economic growth by half a percentage point. Coal is Colombia’s biggest export after oil.

The economy expanded 2.8 percent in the first quarter from the year earlier, compared to 4.8 percent growth in Peru and 4.1 percent in Chile.

To contact the reporter on this story: Andrew Willis in Bogota at awillis21@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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