Commodity giant Glencore recently announced plans to cut annual output at its Cerrejon coal mine in Colombia by 5–10 mln mt in response to prolonged decline in coal prices. After the reduction, Cerrejon’s production capacity will fall to between 11–16 mln mt. Cerrejon is Colombia's second-largest coal mine and has already reduced its 2024 output to 19 mln mt, representing an annual decline of 13.6%. Glencore’s announcement comes as a result of prolonged pressure from high government taxes and frequent disruptions, such as blockades and protests from local communities. This analysis will address how this could further deteriorate Colombia’s coal industry.
According to data from International Energy Agency (IEA), Colombia, the largest coal producer in Latin America, saw its total coal output in 2023 reached 66 mln mt, up 1.5% from 65 mln mt in 2022. Historically, Colombia’s peak annual output was 85 mln mt in 2017. During the covid pandemic in 2020, Colombia’s coal output plummeted to 50 mln mt, a 42% y-o-y decline and has since remained at around the 60 mln mt level annually. In 2024 Colombian coal production is expected to have declined by 7.4% from 2023 to a total of 61 mln mt.
On the seaborne trade front, AXSMarine data shows Colombia ranked as the world’s sixth-largest seaborne coal exporter in 2024. Its annual exports reaching 56.96 mln mt. As the EU accelerates its energy decarbonization transition, Colombian coal is shifting towards the Asia-Pacific market. In 2024, its top export destinations are South Korea (10 mln mt), China (6.65 mln mt), and Türkiye (6.57 mln mt). Notably, this marks the first time Asian countries have occupied the top two spots among Colombia’s coal export destinations—traditionally dominated by European countries like Türkiye and the Netherlands.
However, for China and South Korea, Colombian coal primarily serves as a supplement to their mainstream coal supplies, accounting for only 1.6% and 9% of their respective seaborne coal imports in 2024. This is largely due to the long voyage distances and the resulting high freight costs. According to AXSMarine estimates, the average laden voyage time from Colombia to China and South Korea in 2024 is 55 days and 67 days, respectively - second only to coal shipments originating from the United States and Russian ports in Europe.
Against this backdrop, even though Colombia’s coal trade with the Far East reached a historic high last year, this trade route remains particularly fragile and faces numerous challenges—pricing being the most significant. For the price sensitive Far East buyers, the prospect of waiting nearly two months for delivery is increasingly unattractive, especially amid a declining coal price environment (where prices may fall further during shipment). At the same time, elevated freight rates continue to squeeze the negotiation margins for both buyers and sellers. End of March, the CFR price gap (basis China ports) between Colombian and Australian 6,000 kcal thermal coal further widened to $14/mt, with Australia becoming more competitive in February. Traditionally, Colombian coal has been priced slightly below Australian coal to attract buyers.
With Colombian coal exports are shifting to the Far East, there is a clear trend toward using larger vessels to carry coal. Although Colombia’s overall coal shipment volume in 2024 rose by just 1.6% y-o-y, Capesize shipments have significantly displaced Panamax cargoes. Capesize volume reached 33.7 mln mt (up by 18.3% y-o-y), while Panamax shipments fell by 24.6% y-o-y to 11 mln mt the same year. In other words, with Colombia’s recent coal production cuts, the Capesize segment is likely to face greater pressure given the reduced demand it represents. In terms of cargo volumes, China and South Korea imported 2 mln mt and 0.6 mln mt of Colombian coal respectively in 1Q25, compared to 3.9 mln mt and 2 mln mt during the same period last year—over 60% of which was transported via Capesize vessels. As the second-largest Capesize loading country in South America, this suggests that shipowners need to exercise greater caution when ballasting to the South American market. Indeed, beyond Brazil, it may be increasingly difficult to find stable cargoes to support their laden voyages.
Furthermore, Colombia’s cargo supply is highly unstable, indeed, the latest data released by Colombia’s official showed that coal exports reached 4.2 mln mt in February, marking a 21.1% y-o-y decline but a 54.7% m-o-m increase. Unlike seasonal weather disruptions, the blockades disrupt supply chain and create uncertainty in coal deliveries at port, leading to significant fluctuations in monthly shipment figures. AXSMarine data shows that across 2020-2024, the peak and lows in Colombia’s monthly export volumes have occurred in various months. This haphazard outflow makes it tricky for market players to predict the coal availability and to arrange vessel deployment.
In conclusion, due to near-term subdued coal demand, Colombia’s reduced coal output is unlikely to reverse anytime soon. This loss of around 10 mln mt in cargo volume is expected to dampen shipping demand in the South American market — particularly for Capesize vessels. Considering the longer voyage distance, the decline in seaborne tonne-miles that is estimated to result from Glencore’s production cuts, will most likely weigh on the fundamentals of the dry bulk shipping market.