Despite a profit loss for the quarter, Teck’s steelmaking coal division has reported increasing profit margins in its Q3 report for 2020, with adjusted site cash cost of sales per tonne expected to fall below $60 by the end of the year.
The company also reported declining production, sales and prices across its steelmaking coal division as a result of the impact of COVID-19 on demand and production.
Over the three months ended Sept. 30, Teck coal produced 5.1 million tonnes of coal compared to 6.5 million tonnes the same time last year.
The company managed to sell every tonne according to its Q3 report however, with 5.1 million tonnes sold in the last three months. In 2019, the company sold 6.1 million tonnes in the quarter.
Prices for steelmaking coal remain lower however, with the average being US$102 per tonne through Q3 compared with an average of US$156 at the same time last year. As a result revenues were down significantly in the steelmaking coal division to C$699 million for Q3 2020, compared to C$1,277 in Q3 2019.
The fall in revenue means the steelmaking division falls to second place amongst Teck’s commodity divisions for overall revenue, behind zinc, which netted the company $874 million in Q3.
The coal division normally nets the most revenue for Teck each year and on a quarterly basis.
As a result of the declines, the steelmaking coal division has posted a gross loss over the quarter of C$63 million, compared to gross profits of $425 million in Q3 2019.
The company blamed the C$71 per tonne decrease in steelmaking coal prices and a fall in sales volumes for the loss.
Copper and zinc posted gross profits for the company for the quarter, with copper proving the most profitable at $232 million.
The pandemic loomed large over the coal division, with the Q3 report saying that it was continuing to impact demand, but demand was beginning to pick up around the world.
“Steel production in China returned to pre COVID-19 production levels during the second quarter,” read the report.
“China continued to increase steelmaking coal seaborne imports to mitigate lower Chinese domestic production and lower imports from Mongolia through the third quarter. We expect steel producers outside of China to increase production in line with improved demand for their products in the fourth quarter as economies start to reopen and some previously idled steel plants return to production.”
Teck did acknowledge increased tensions between China and its import partners, noting restrictions directed towards Australian coal.
“Subsequent to the end of the third quarter, customers and market sources are reporting that China heightened seaborne import restrictions effective October for an undefined period. While there has been no official announcement, the restrictions appear directed mainly toward Australian coal.”
The company said that it didn’t expect its own exports to be affected negatively.
For outlook, Teck said it expected to sell between 5.8 and 6.2 million tonnes of steelmaking coal in the last quarter of the year, which would place its annual sales between 21.6 and 22 million tonnes. The company maintains its annual capacity of 26-27 million tonnes.
READ MORE: Teck Trail reports $7M third quarter loss
scott.tibballs@thefreepress.ca
Like us on Facebook and follow us on Twitter