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Batista’s MPX Targets China for Sales of Colombian Coal

Brazilian billionaire Eike Batista. Photographer: Chris Goodney/Bloomberg
Brazilian billionaire Eike Batista. Photographer: Chris Goodney/Bloomberg

Sept. 21 (Bloomberg) -- MPX Energia SA, the energy company controlled by Brazilian billionaire Eike Batista, said it’s targeting China as the “main market” for the coal it will produce in Colombia.

Utilities in China, India, South Korea and the rest of Asia likely will buy half of MPX’s coal from Colombia, Gustavo Gomes, the company’s chief operating officer for mining and gas, said yesterday in an interview. MPX is seeking supply deals as well as buy mine equipment in China, he said.

“China is the new demand,” Gomes said in Bogota. “The future in Asia is certainly coal.”

Rising demand in China, the world’s biggest energy user, is driving expansion by MPX, BHP Billiton Ltd., Anglo American Plc and Drummond Co. in Colombia, South America’s largest coal producer. China’s coal imports rose to a record in July, Australia & New Zealand Banking Group Ltd. said last month.

MPX will be aided by “excess capacity” in the market for capesize ships that haul coal, a surplus that probably will last until 2018, Gomes said. MPX’s mine in northern Colombia will start output next year and is scheduled to produce 35 million metric tons in 2020.

MPX rose 21 centavos to 37.61 reais at 10:39 a.m. in Sao Paulo trading. The stock has climbed 41 percent in the past year, compared with a 17 percent drop for Brazil’s benchmark Bovespa index.

In the long term, Colombian coal exports to Asia also will benefit from the expansion of the Panama Canal, scheduled for completion in 2014, the president of Drummond’s Colombian unit, Augusto Jimenez, also said yesterday in Bogota. Alabama-based Drummond plans a $1.3 billion investment in Colombia.

BHP, Xstrata

BHP, the world’s largest mining company, Anglo American and Zug, Switzerland-based Xstrata Plc are also undertaking a $1.3 billion expansion at their jointly owned Cerrejon mine in the South American country. The mine, near MPX’s development, will increase production to 40 million tons in 2017 from about 32.5 million tons this year, according to the companies.

In June, Itochu Corp. agreed to pay 130 billion yen ($1.7 billion) for a 20 percent stake in Birmingham, Alabama-based Drummond’s Colombian operations to add a source of supply to Asia. Itochu said then it will sell its share of output to power plants in Japan and the rest of Asia.

Drummond, which produced 24 million tons of coal last year in Colombia, is investing to expand production to 25 million tons from 3 million tons at its El Descanso mine.

Colombia’s coal production this year will rise to at least 80 million tons from 74.4 million tons last year, according to government estimates.

To contact the reporter on this story: Heather Walsh in Santiago at hlwalsh@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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