Downturn in Market price for Coal

Teck’s Senior Vice President, Robin Sheremeta, sent a memo to coal employees outlining the downturn in market price for coal and how dramatic cost reduction initiatives could be implemented in the Elk Valley.

The metallurgical coal market is showing signs of strain from oversupply as steel production cuts bite coke sales.

Sluggish global steel demand pressures iron ore and metallurgical coal prices. Global steel mill margins have shrunk in 2019, in turn pushing down iron ore and metallurgical coal consumption and prices.

In 2018 hot rolled coil spot prices exceeded $1000/mt for the first time since 2008, and the sustained run in steel pricing and demand since 2016 delivered high profits for steel.

High global steel prices last year have quickly been forgotten, as offtake from steel buyers in the US and Europe reduced into 2019, and high iron ore and coke costs squeezed margins.

Steel production declines are gathering pace and reducing consumption of metallurgical coal. Price negotiations in North America for coal supplied through 2020 are seeing low bids back at 2018 levels. The price of metallurgical coal has dropped from about $200+ per tonne to around $100+ per tonne.

The cost reduction initiative options are being studied now and will be rolled out shortly.