Carbones Andinos, the second-largest met coke producer in Colombia, is exploring the sale of a stake in the business to fund its modernisation plan and increase capacity. Chief executive Mauricio Cardenas spoke with Argus about the challenges facing the Colombian met coke industry and the need for further investment in the country.
Could you tell us about the difficulties Colombia face?
Even though we own our own mines — medium to small mines with a maximum capacity of 5,000t each — and we consider it a competitive advantage to have domestic coal, we currently face a limitation of capital investment to make those mines profitable and to increase production volumes.
We cannot aim for large volumes to decrease our costs without capital investment. Moreover, inflation from Covid-19 and recent regulations in the country have increased our mining costs and made it difficult to maintain profitable operations.
On the monetary side, the Colombian peso has strengthened by about 15pc against the US dollar over the past year. As a result, when we convert our export revenues into local currency, we receive fewer pesos. We can hedge this risk, but only when sales are confirmed, which has not always been the case recently.
At the same time, global market conditions have changed. Indonesia had excess supply after India introduced restrictions in January 2025 and started selling to new markets, including Brazil, a market that usually represents about 60pc of our sales. This has affected our business. However, Brazilian steel producers are now returning to us, as Indonesian prices have increased and supply from Asia alone is not always reliable. Geographically, we are the closest supplier to Brazil.
You mentioned that domestic coal production is an advantage. But right now, that's not necessarily helping because prices on the international coking coal market have dropped off over the past two years. How much of an advantage is domestic production normally?
Normally it is a competitive advantage because we can reduce costs by having internal supply chains when international coal prices are high. We have plenty of licensed reserves, but those licenses need investment to scale up production to profitable levels when international prices fall.
The Colombian government is less supportive of coal mining than it used to be. How is the regulatory environment in Colombia looking?
Yes, it has been challenging. The regulatory environment has become more difficult in recent years, with government policies targeting the thermal coal sector also affecting the metallurgical side indirectly. These policies have increased costs, including transport, taxes and labour. With elections coming up in June, fossil fuels will definitely be part of the debate and the results will determine coal policy for the next four years.
What needs to happen for Colombian met coke to remain competitive with Indonesia in the Atlantic market?
We require continued support from customers and investors. In our view, moderate investment in Colombian coal and coke production is more effective than large investments in old infrastructure in other regions.
Carbones Andinos is a family-owned company and you are now starting to look for external investors. Why have you decided to go down this route and what do you want to do with that capital?
We have a clear investment plan focused on increasing capacity and improving technology towards our 2030 goals. In 2021, we began changing our coke technology to horizontal heat-recovery, which started operating in February 2024 and has performed well. This is part of a three-phase plan that requires additional funding.
We also plan to expand our mining operations. We own one of the largest metallurgical coal licences in Colombia and produce a nice low-volatile coal with a CSR above 70, but we are currently producing below its full potential. There are also opportunities to improve logistics and supply chains. We are already working on these areas, but we need capital to move forward.
A lot of investors might ask, because Colombia is struggling so much right now, why should they invest in Colombia instead of somewhere else?
The key point is the efficiency of capital. Smaller investments in Colombia can generate strong returns, compared to much larger investments needed in other countries. This is because we can improve productivity quickly if we scale our operations. Companies like ours offer the possibility to increase competitiveness with relatively limited capital.
What would happen if the Colombian market is unable to attract investment?
Colombian mines and coke batteries might be producing at around 40-60pc of their capacity. A lot of these companies are in a poor financial state, so our continuity is endangered and compromised.
The supply gap in the market would definitely increase prices substantially. If Colombia decreases production levels, buyers will depend on a a few producers in Asia for the majority of their raw material needs, which is not good for trading stability.
