Teck blames coal glut for three-week shutdown
Teck Resources Ltd., one of Canada’s largest mining companies, says it may cut more coal production than the 1.5 million tonnes already planned this year if the market doesn’t improve.
The miner is temporarily shutting down its six coal mines for three weeks this summer to reduce supply in a global market that it estimates has 10 million to 15 million tonnes more coal than needed.
“Our industry continues to face difficult conditions,” president and CEO Don Lindsay said in a conference call Thursday. “Q2 prices for all of our major commodities were lower than the same quarter last year.”
Teck Resources won’t be able to determine until the end of September whether any further production cuts are necessary, Lindsay said. But he added that if the firm decides to do that, it would likely be on the same scale or less than this summer’s production cuts, some of which are underway.
The warning came as Teck Resources said it earned a profit attributable to shareholders of $63 million or 11 cents per share in the quarter ended June 30, down from $80 million or 14 cents per diluted share in the same quarter last year.
Lindsay said Teck has been helped by the low Canadian dollar, while the strong U.S. dollar has contributed to at least six American coal companies declaring bankruptcy and others being delisted or consolidating shares.
“It’s helped us in Canada and it’s certainly helped Australia, and it doesn’t help the U.S.”
The company’s average realized price for coal in the quarter was $95 US per tonne, down from $111 US a year ago. But in Canadian dollars, the average realized price slipped to $116 per tonne from $122 last year.
The coal industry has been hit with a glut of supply from low-cost Australian producers as well as dropping demand from a slowing Chinese economy.