Teck Resources (TECK) Q3 Coal Volume Dips Y/Y Due to Wildfire
Teck Resources Limited TECK recently announced that its third-quarter 2023 steelmaking coal sales volumes have been impacted by the slower-than-expected supply-chain recovery following the wildfires in British Columbia, labor disruption at ports, and plant challenges.
Steelmaking coal sales volumes were 5.2 million tons in the third quarter compared with 5.6 million reported in the year-ago quarter. It also came in lower than the sales volume of 6.2 million tons in the second quarter of 2023. Volumes also fell short of the company’s guidance of 5.6 to 6.0 million tons for the quarter.
During its second-quarter conference call, Teck Resources had provided the guidance factoring in lower inventories at the end of the second quarter and planned maintenance shutdown activities at two of its operations during the third quarter.
The company had also stated that labor disruption at ports could impact its sales volumes in the third quarter. Teck Resources had thus anticipated a rise in transportation costs as it utilized its additional port capacity to deliver on customer commitments. The company, however, maintained its transportation cost guidance at 45-48 CAD per ton for the steelmaking coal segment in 2023.
Teck Resources reported average realized steelmaking coal price of $229 per ton in the third quarter of 2023. This was lower than the steelmaking coal prices of $304 per ton in the third quarter of 2022 and $264 per ton in the second quarter of 2023. TECK expects to report provisional pricing adjustments of $23 million in its third-quarter results, which are scheduled to be reported on Oct 24, 2023.
In the second quarter of 2023, the segment reported sales of CAD$2.25 billion ($1.68 billion), reflecting a year-over-year slump of 39% due to the significant decline in steelmaking coal prices from the all-time highs in the same period last year. The segment reported a gross profit of CAD$1,100 million ($821 million) in the second quarter, which was down 57% from the second quarter of 2022.
We expect the steelmaking coal segment’s sales to be around CAD $1.63 billion ($1.21 billion) in the third quarter of 2023. Compared with the sales of CAD $2.27 billion, the figure indicates a year-over-year drop of 28%.
Teck Resources had earlier stated it is actively engaged in the divestment of the steelmaking coal business and is engaging with a number of potential suitors. The business is garnering interest due to its significant high-quality steelmaking coal reserves and stable demand outlook.
Teck confirmed in June that it is engaging with Glencore GLNCY about their proposal regarding the steelmaking coal business. Glencore has offered about $8.2 billion to buy the business.
In case this business is sold, TECK will be able to focus solely on the metals needed for the energy transition, such as copper and zinc. Teck Resources and other mining companies like BHP Group BHP and Rio Tinto plc RIO, among others, are trying to capitalize on the growing demand for copper, driven by electric vehicles, renewable energy and infrastructure investments.
BHP has created a new copper province in South Australia following the acquisition of OZ Minerals in May 2023. The company is investing strategically in new ideas, technologies and countries through exploration and early-stage copper and nickel prospects to capture growth opportunities.
Rio Tinto, in August 2023, had announced that it has formed a joint venture to develop the La Granja copper project in Peru. It is one of the largest undeveloped copper deposits in the world and will augment Rio Tinto’s copper portfolio.
The company is also developing the Oyu Tolgoi project in the South Gobi region of Mongolia. It is one of the largest known copper and gold deposits in the world. When the underground mine is complete, it will be the fourth-largest copper mine in the world.
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