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Venezuela opens border but refuses Colombian coal

26 Sep 2016 19:01 (+01:00 GMT)
Venezuela opens border but refuses Colombian coal

Bogota, 26 September (Argus) — Venezuela continues to block the transit of Colombian coal, despite agreeing to reopen the border to trucks.

Venezuela granted access to trucks from Colombia loaded with food and other products on 23 September, in a move that constitutes a new phase in the staggered reopening of the countries' 2,219km border, Venezuelan province Tachira's governor, Jose Vielma, said. Trucks can run daily between 20:00 and 24:00 (00.00-04.00 GMT) and the hours of access will be extended over the coming weeks.

But Venezuela has not allowed the transit of Colombian coal, on which it is considering imposing an "environmental tax", according to regional coal industry association Asocarbon's director Jaime Rodriguez.

The countries initially opened the border on 13 August to allow pedestrians to cross at five points.

The border was closed to trucks on 19 August 2015, as Venezuela attempted to choke off the smuggling of cheaper Venezuelan products into Colombia, including gasoline. Caracas also claimed that right-wing Colombian paramilitary groups were trying to infiltrate the country.

Venezuelan authorities are verifying that drugs are not camouflaged in the trucks and are reviewing whether some of the cargoes should pay tariffs, Vielma said.

Executives at thermal coal exporting firms — including trading companies Bulk Trading, Inter-American Coal, Trafigura and Colcarbex — said they might evaluate the Venezuelan route if costs savings are significant. But this export option looks unlikely for now, with Venezuelan trucker drivers demanding $12/t in freight rates, three times more than the $4/t they charged before the border was closed.

Producers in Colombia's Norte de Santander province have long shipped their high-heat thermal coal across the land border at Cucuta on Venezuelan highways, which resulted in a $15-20/t savings compared with the $25-30/t cost of transport through Colombia's mountainous roads to domestic Caribbean ports, such as at Santa Marta and Barranquilla — producers in the province have been forced to cut output by an average 25pc since August last year, because of these high domestic transportation costs. The distance to Maracaibo, Venezuela, is a much shorter 300km, compared with 700km to Colombia's Caribbean ports.

To make the business viable, Norte de Santander's exporters now buy thermal coal produced in Cesar province, home of Drummond and Glencore, to then blend with their own high-quality supply, which has an average heat content of 12,900-13,000 Btu/lb, Rodriguez explained.

Peace deal close at hand

Colombia will sign the final accord on the peace process with the country's largest guerrilla group, Farc, today, bringing a 52-year conflict to an end.

Negotiations between the government and Farc have lasted for four years, resulting in a final agreement revealed on 24 August.

Colombians will vote in a referendum on 2 October to decide whether to endorse or reject the agreement. Opinion polls have said repeatedly that the "yes" vote will win, but a recent poll showed that the gap between those for and those against is closing.

Until recently, Farc attacked energy infrastructure. The last bombing of coal a railway was in 2013, when the Cerrejon line was attacked seven times. The Cerrejon joint venture between BHP Billiton, Anglo American and Glencore, owns the 150km railway that connects its open-pit coal mine of the same name in Guajira province with Puerto Bolivar.

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