Colombia continues as a major coal and coke exporter

Colombia

Gabriel González, CEO of Grupo Coquecol, talks to The Energy Year about Colombia’s importance as a producer and exporter of metallurgical coal and coke, the volumes the company markets and its clientele. Grupo Coquecol produces and exports metallurgical coal and coke.

What importance does Colombia have as a producer and exporter of metallurgical coke?
Colombia has a privileged position because there are only four countries that produce metallurgical coal in the Americas: the United States, Canada, Colombia and Venezuela. Currently metallurgical coke is the sixth-most-important export product in Colombia and the top industrial product exported in the country. Colombia is the third-largest exporter of metallurgical coke, after China and Poland.
Metallurgical coke is an essential element in the global steel value chain, and Colombian coke supplies markets such as Brazil, India, Turkey, the United Kingdom, Argentina, Mexico and many others.
Colombia maintains a volume of 4 million-4.5 million tonnes of metallurgical coke exports per year and about 1 million-1.5 million of metallurgical coal. In terms of quality, metallurgical coal and coke have binding properties. The coke agglomerates all those fixed carbon particles and joins them with the iron ore during the steelmaking process. That is how steel is produced at high temperatures. Colombian metallurgical coal and coke are of very good quality.
Lastly, metallurgical coal reserves in Colombia are concentrated throughout the eastern cordillera, while thermal coal reserves are concentrated in the north of the country, in Cesar and Guajira, as well as other departments. The vast majority of thermal coal is mined via open-pit mining, whereas metallurgical coal is mined in the mountains and thus is procured mostly via underground mining.
This means that, for metallurgical coal, the mining techniques are much more complex and more artisanal. Moreover, the production level of metallurgical coal in Colombia tends to be much less than that of thermal coal.

What volumes of metallurgical coal and coke do you market, and what types of customers do you target?
Coquecol Group was founded in 1992 in Boyacá, and since then, it has been one of the leaders in the production and export of metallurgical coal and coke in Colombia. We are in both markets, which gives our portfolio a degree of diversity, and we produce and export both products.
Regarding coal, we are one of the largest exporters of metallurgical coal in Colombia. We export 600,000-700,000 tonnes of coal annually. In terms of metallurgical coke, we are the fourth largest in terms of export volumes, with around 300,000 tonnes of metallurgical coke exported per year. Adding the two products together, we reach 900,000-1,000,000 tonnes of exports for these two products, making us leaders in the export market.
We always guarantee the quality of our products, which is a critical feature for attracting clients. Our largest customer, which represents almost 50% of our sales, is the Brazilian steel company Gerdau.
They have very high quality standards. Around 30% of the blend they use for their steel production comes from Colombia and specifically from Coquecol. That is a big source of pride. We always try to be in that segment of premium coals and cokes to supply customers that produce high-quality steel.
Nearly all the metallurgical coal and coke that is produced in the country is exported. Around 10% stays in the local market, which Colombia’s only integrated steel mill company, Acerías Paz del Río, produces and consumes. Coquecol has a broad portfolio of countries it exports to, including Brazil – which currently absorbs around 80% of our production – the UK, Argentina, Turkey, India and Mexico. These are our main export markets.

How important are vertical integration and alliances with suppliers for the Group?
In 2018, we made a strategic decision to vertically integrate our value chain. We decided to buy a mining company called Intercarbon Mining. It was producing around 70,000 tonnes per year, or 6,000 tonnes per month.
After a process of exploration and a series of investments, we ramped up production to 150,000 tonnes of coal per year. This represents between 10-12% of the coal we market. We still depend a lot on the market and on our suppliers. We buy around 900,000 tonnes of coal per year.
Then, we have a company called Incolmine, which is located in Norte de Santander, in Cúcuta. The reserves there hold high-volatile coal, which is similar to thermal coal, which has a higher calorific value. This coal is used to produce a product that is visually the same but has different chemical and quality features. It is called reactive coke or ultra-low-phosphorus coke.
This reactive coke does not supply the steel mills that produce flat steel, construction steel and so on but rather is used for the ferroalloy industry. From it, products such as ferrochrome, ferromanganese and ferrosilicon are produced. Incolmine owns a mine called Mina Presidente, which has an output of around 40,000 tonnes per year.
Nevertheless, it is strategically important for us to have our own production. Firstly, this is because we want to guarantee we have our own coal. Secondly, it gives us a good sense of what is happening in the market from a producer’s point of view. By having mining operations, we know what the challenges, the costs and the benefits are first hand. This allows us to tackle the market better and make stronger alliances.
Although we are not considering further investments into broadening our mining operations, we have focused on making strategic alliances with our suppliers. For example, we entered into co-investment alliances with some to guarantee that the coal they mine is also our own coal.
These are long-term contracts we develop with them on their mines where they guarantee the operation while we provide close technical and financial support.

What coke production plants do you have?
In terms of plants, in Cundinamarca we have two plants: the Castilla Plant and the Cucunubá Plant. In Boyacá we have three plants: the Salamanca plant in Samacá, the Andalucía plant in Paz del Río and the Compostela plant in Socha. In Norte de Santander we also have the Alcalá plant, near Cúcuta.
However, only the Castilla and Salamanca plants are currently producing metallurgical coke. When the market demands, we reactivate the Alcalá plant for reactive coke.

What is the Group doing in terms of ESG?
Sustainability has become a key matter for us over the last years. We decided to incorporate sustainability into the corporate strategy of the Group, and ever since, sustainability is the main aspect with which we strategically align.
Over the last three years, we have worked on a project of circular economy to give a second life to products derived from our operations that were previously discarded. Another initiative is the reuse of gases from coke furnaces to produce energy.
Sustainability also means being aligned in terms of corporate social responsibility, which we have done with the Coquecol Foundation, which promotes three different areas: entrepreneurship, education and sports. We promote these three areas in the communities where we work as a means to improve the future and livelihood of their people.
We actively listen to their needs, their ideas and their concerns. We are in constant contact and communication with these communities, holding working groups. It is a win-win situation for all.

How important is Multinexa, and how does it work as the logistics arm of the company?
Multinexa is the logistics company of the Group. We have developed two important logistics phases. The first one is “internal transport,” which is land transportation. This entails the transport of coal from our own mines and those of third parties to our plants, either to stockpile coal that is then shipped as raw coal to the ports or to stockpile coal for coke production in the plants.
Once we have the products – either the raw coal that is dispatched to the ports or the coke already produced in the plants – Multinexa transports it all to the ports on the Caribbean coast. About 45% of all the product we move to the ports is done by Multinexa.
Our main export port is in La Guajira: Puerto Brisa. We export the rest of our cargo through Barranquilla, through the port of Sociedad Portuaria Regional de Barranquilla. Sometimes we also use the services of ports such as Riverport and Palermo Sociedad Portuaria.
We have a strategic project underway, which is to develop multimodal transport projects so we do not depend so much on land transport. We are looking at ways to develop river and rail transport. A few years ago, we did some tests on river transport, moving some of our products on the Magdalena River on barges. We are currently developing an alliance with a rail transport operator to move some of our products by train to Santa Marta.
In this way we can export, minimise logistics costs and reduce our carbon footprint. It is one of our most strategic projects, both for the Group and for Multinexa. The company today is not a port operator, but our idea for the future is to take that next step by participating in the Group’s port operations.

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