Teck’s profits are roaring back from 2020, with the company announcing in its unaudited Q2 2021 report that profits were up 281 percent last quarter compared with the same time last year.
Gross profits for Q2 (April-June) were $689 million – up from $139 million in Q2 2020, when the worst of the economic effects of the ongoing pandemic were biting into the company’s bottom line.
Much of the recovery is attributed to Teck’s Chilean copper assets, with the copper division of the company seeing an increase in gross profit of 198 percent, but steel-making coal has been reaping the benefits of a choppy relationship between China and the world’s largest coal exporter (Australia), and a recovered coal industry.
Teck sold 6.2 million tonnes of coal in Q2, of which approximately 2 million tonnes were sold to China at a premium over Australian prices, as China snubs Australian coal due to ongoing diplomatic disputes. According to Teck, the premium China is paying for Canadian coal will be reflected further in the next quarterly report. There does not appear to be a growing appetite for Canadian coal, as Teck sold a similar amount of coal to China in Q1.
For this quarter, prices paid for coal was up to CAD$177 a tonne, compared to CAD$157 in Q2 2020.
Gross profit for the coal unit of Teck was significantly up, at $233 million for Q2 2021, compared to only $58 million in Q2 2020.
The company reported demand for coal had increased as China has long since returned to pre-COVID levels, and has been producing steel at record levels since the beginning of this quarter. As production is now increasing outside of China, demand across the market is now driving prices higher, leading Teck to have a rosy outlook on China as a well-paying customer.
Coal production for Teck has recovered to pre-COVID levels, reaching 6.4 million tonnes in Q2 2021, compared to 5.1 million tonnes in Q2 2020 when the company curtailed production due to disruptions further down the supply chain.
Speaking of the supply chain, upgrades to Teck’s Neptune terminals in North Vancouver have progressed to site-wide ramp-up. The upgrades increase capacity at the terminals, allowing Teck to ship more coal at a lower price.
Since Q2 ended, the company has been affected by wildfires in B.C. that have disrupted transport connections between the Interior and the Lower Mainland. The disruption will show up in the Q3 report, due to be released three months from now.
Finally, the company has revised down its coal production guidances for 2021, from 25.5 to 26.5 million tonnes to 25 to 26 million tonnes. Teck reduced its sales guidances recently due to the disruptions from wildfires.
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