Trent Ernst, Editor
Teck has released its third quarter earnings, alongside the contract price for the fourth quarter, and the price they’re making for coal has more than doubled.
While spot price for coal have hit as high as $254.50, contract prices are typically much more conservative, so the fact that Teck has signed contracts for steelmaking coal based on a price of US$200/tonne for top quality coal is a sign of a strong market. “This is consistent with prices reportedly achieved by our competitors,” they say in their quarterly report.
That’s up US$107.50 from the reported third quarter settlement of US$92.50 per tonne, and the price of coal continues to push towards record high territory.
However, most analysts say the prices won’t last.
The prices have been driven up by a variety of different factors that have all hit the market at the same time.
Back in April, for instance, China made the decision to limit the number of days coal mines could operate to 276 days per year. They also promised to close down 1000 coal mines this year, as well as not open any new mines.
The plan was to help revitalize the coal industry, but natural disasters and man-made constraints hit the market at the same time, causing coal prices to spike.
Just last week, it was reported that Beijing has begun to reverse this strategy, removing these supply constraints, which will most likely ease demand.
But that, as well as the announcement that seven coal mines (both steelmaking and thermal) in Australia will either restart or resume operations by the end of the year, should drive prices back down again. One of those mines, Isaac Plains, was sold last year for a dollar.
Closer to home, Conuma continues to mine Brule, working to get the mine into full production.
Attempts to get the Wolverine Mine up and running by early next year, however, seem to be at an impasse.
Mayor Don McPherson says he has been in discussions with CN Rail, who are planning to have the Tumbler Ridge line back in operation by August.
Conuma was hoping to start moving coal out of the mine by April.
While four months may not seem like a long time, in the current volatile market, prices could easily go down as sharply as they have gone up.
However, analysts are cautiously optimistic that the price for steelmaking coal won’t drop to the same depths as before, expecting the price to settle in somewhere around the US$120–$130 range.
Despite the rise in prices, there was no talk of re-opening Quintette. Sources say that prices would have to be solidly in the $140–$150/tonne range for at least a year before companies like Quintette and Anglo American, with their Peace River property, would look at re-opening.