(Recasts with comments on coal market from conference call)
By Nicole Mordant and Allison Martell
July 24 The steel-making coal market needs to
cut another 10 million tonnes of production to get into balance,
the chief of Teck Resources Ltd said on Thursday after
the Canadian miner reported a sharp fall in profit, mainly due
to weak coal prices.
Producers in the oversupplied market have already announced
cuts of about 20 million tonnes but that is not enough, Teck
Chief Executive Don Lindsay said. Only about 3 million tonnes of
that has been implemented, with the rest expected to come into
effect early next year, he added.
"With such a huge percentage of the industry operating in a
cash negative basis we do anticipate that the 10 million tonnes
of further reductions that we think are needed will occur. We
just can't predict the timing," Lindsay said on a conference
As a result, current market conditions could persist "for a
couple of quarters or longer", he said.
Vancouver-based Teck is the world's second-largest exporter
of seaborne steel-making coal. Prices are at their lowest levels
since 2007, below $120 a tonne, hurt by oversupply and lower
demand from chief buyer China.
Lindsay cautioned that although U.S. and some Australian
producers have shuttered production, other Australian companies
have increased output.
RESULTS BETTER THAN EXPECTED
Teck, which also mines copper and zinc, said its quarterly
earnings dropped 44 percent to C$80 million ($74.47 million).
But its shares rose 2 percent as the results beat market
expectations, while the company trimmed its full-year cost
"Teck is having some success reversing the higher unit costs
that alarmed investors when the company provided 2014 guidance,"
TD Securities analyst Greg Barnes said in a note to clients.
Teck, which in April said it would cut 5 percent of its
workforce, lowered its 2014 mine-site coal cost estimates to
between C$52 and C$57 a tonne sold from C$55 to C$60 a tonne. It
also lowered its copper cost forecast to between $1.95 and $2.05
a pound from $2.00 to $2.20 a pound.
The miner, which is in the process of restarting its Pend
Oreille zinc mine in northeastern Washington state, raised its
zinc output estimate. It now expects to produce between 600,000
and 615,000 tonnes of zinc in 2014, up from 555,000 to 585,000
tonnes due to a stronger performance at its Red Dog mine in
Teck said coal prices fell to $111 per tonne in the second
quarter from $156 a tonne a year earlier. The company sold 6.8
million tonnes of coal during the quarter, compared with 6.3
million tonnes a year earlier.
The company expects coal sales to be at, or above, 6.0
million tonnes in the third quarter, ending in September.
Teck's adjusted earnings fell to 13 Canadian cents a share
in the quarter from 34 Canadian cents a share. That was just
ahead of analysts' estimates of 12 Canadian cents a share.
(Additional reporting by Sneha Banerjee in Bangalore; Editing
by Gopakumar Warrier, Sriraj Kalluvila and Peter Galloway)