Teck to idle six Canadian coking coal mines

OREANDA-NEWS. Teck Resources will temporarily idle its six Canadian coking coal operations in the third quarter, reducing production by about 1.5mn t, as it seeks to "align production and inventories with changing coal market conditions."

Vancouver-based Teck, the world's second largest coking coal exporter, will stagger three-week shutdowns at each of its operations over the summer,

The cuts will reduce production in the quarter by about 22pc to 5.7mn t, with sales expected at 6mn-6.5mn t for the quarter, Teck said today. Annual coal production is now estimated at 25mn-26mn t, down from a prior 26.5mn-27.5mn t target.

"Additional coal production adjustments will be considered over the course of 2015 as market conditions continue to evolve," the company said.

Teck will meet contracted and committed sales. Teck's accounting for the stripping, or debris it removes during mining, is expected to come in at about \\$65mn lower than original guidance, reflecting lower production and reduced stripping costs due to lower diesel costs and higher productivity.

"Rather than push incremental tonnes into an over-supplied market, we are taking a disciplined approach to managing our mine production in line with market conditions," Teck chief executive Don Lindsey said.

Teck in 2014 produced a record 26.7mn t of coking coal, with sales of 26.2mn t. Its production capacity is about 28mn t/yr.

Teck produced and sold 6.8mn t in the first quarter at an average realized price of \\$106/t, down from \\$131/t a year earlier. Teck last month said it expected second quarter coal sales at around 6mn t.

Teck last year deferred the restart of its Quintette project. Once that renews production, capacity will rise to 31mn t/yr.

Teck's announcement comes as spot prices for hard coking coal FOB Australia is around \\$85/t this week, down from about \\$336/t in January 2011.

About 30mn t of cuts and closures has been announced since early 2014 but less than half had been implemented by the end of last year, Teck said in February.

Teck's cutbacks follow similar moves by US producers. Thermal coal producer Murray Energy on 22 May said it was laying off 1,800 employees, about a third of its workforce, and would cut output by about 3.5mn t.

Alpha Natural Resources in recent weeks has announced idlings at thermal and coking coal mines in Central Appalachia, while Patriot Coal on 12 May filed for Chapter 11 bankruptcy protection.