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Teck (TECK) Cuts Q3 Coal Sales Guidance as Fire Hits Rail Line

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Teck Resources Limited TECK has issued an update related to the rail disruptions due to the wildfires in British Columbia (B.C). This incident has damaged the rail line near Lytton, B.C., causing disruption in rail services between Teck’s steelmaking coal operations and west coast terminals.

The company has been executing measures since the Jun 30 accident to mitigate impact of the disruption and focus on redirecting shipments to Ridley Terminals in Prince Rupert. Teck is evaluating the overall impact of the incident to customer shipments and productions, which will be dependent on the length of the rail disruption.

Notably, the company’s second-quarter 2021 sales remain unaffected as the incident occurred on the last day of the quarter. During its first quarter conference call in April, the company had projected steelmaking coal sales volume between 6 and 6.4 million tons for the June-end quarter. However, Teck’s steelmaking coal sales during third-quarter 2021 are expected to be lowered by 300-500 thousand tons due to the incident. The company is also taking measures to ease the impact of rail disruption related to product transportation from Highland Valley Copper operations (HVC).

The company’s all B.C operations are currently operational, with steelmaking coal operations producing and taking advantage of the low levels of clean coal inventory at the mines.

Teck is the world's second largest seaborne exporter of steelmaking coal, with six operations in Western Canada that have significant high-quality steelmaking coal reserves. During first-quarter 2021, steelmaking coal sales volumes improved 9% year over year to 6.2 million tons. For the current year, Teck had earlier guided steelmaking coal production between 25.5 million tons and 26.5 million tons.

Demand for steelmaking coal continues to recover from the impact of the pandemic. The company targets 7.5 million tons steel making coal sales to China in the current year in a bid to capitalize on the increase in demand due to restrictions on Australian coal imports. Moreover, the Neptune Bulk Terminals upgrade project will strengthen the performance of the steelmaking coal-supply chain and meet the long-term requirements of customers for consistent, high-quality product while also lowering overall logistics costs.

Price Performance

The company’s shares have appreciated 107.5% over the past year, outperforming the industry’s growth of 41.3%.

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Zacks Investment Research

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Zacks Rank & Stocks to Consider

Teck currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the basic materials space include Univar Solutions Inc. UNVR, Nucor Corporation NUE and Cabot Corporation CBT. While Univar and Nucor sport a Zacks Rank #1 (Strong Buy), Cabot carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Univar has a projected earnings growth rate of 35.2% for 2021. The company’s shares have rallied around 53% in a year’s time.

Nucor has a projected earnings growth rate of 259.9% for the current year. The company’s shares have soared around 130% over the past year.

Cabot has an expected earnings growth rate of around 126% for the current fiscal year. The company’s shares have surged 60% in the past year.

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