The price of coal has dropped from $210/tonne to around $130/tonne in the last few weeks. Phil McLachlan/The Free Press/File

The price of coal has dropped from $210/tonne to around $130/tonne in the last few weeks. Phil McLachlan/The Free Press/File

‘Unprecedented’ downturn in coal results in uncertainties for Teck

Company says downturn could result in hiring freeze, projects halted, equipment parked, jobs lost

A large downturn in coal pricing could result in dramatic cost reduction initiatives by Teck Resources Ltd in the Elk Valley.

In a letter dated September 26 from Teck’s Senior Vice President (SVP) of Coal, Robin Sheremeta, to all coal employees, the company outlined the cause of the downturn and how it could affect employees around the Elk Valley and parts of Alberta.

Over the last few weeks the price of coal has plunged from about $210/tonne to around $130/tonne. The company said that not only is the magnitude of the decline substantial, but the rate of the decline is ‘unprecedented’.

Sheremeta explained that they have lost 80 per cent of their margins in just four months, with no end in sight. As a result of this, the organization says they’re taking steps to ‘protect the business’ through this uncertain time.

The US$80/t downturn is projected to have reduced the company’s earnings (before interest, taxes, depreciation and amortization) by about C$2.7B in the last few months alone.

The letter was sent to all employees at Teck’s four Elk Valley operations, as well as to their employees at Cardinal River operation near Hinton, Alberta.

Teck operates four steelmaking mines in the Elk Valley and employs over 4,000 people.

A positive market for the past three years ‘never lasts forever’, explained Sheremeta in the letter. This, he said, is the nature of the business.

The last time the company experienced a severe downturn was five years ago, largely driven by oversupply. Sheremeta explained that due to the US China trade war, Brexit and a host of other world issues, this most recent downturn has materialized much faster.

He said Teck is taking a number of steps across all areas of the business to keep in line with competitors in Australia who have a ‘logistical advantage’. The letter mentions several ways Teck is looking to close this gap including investing in the ‘Neptune’ expansion, maximizing production, and closing the gap in operating costs, or else ‘we will become uncompetitive and struggle to generate positive returns in this market’.

A memo this week issued to senior management by Teck’s President and Chief Executive Officer, Don Lindsay, worked to address the downturn.

Lindsay said the company would have to ‘move quickly’ to implement their cost reduction program.

“As we go through this process you can assume that there is an immediate hiring freeze in place, that salaries are frozen save for a very few exceptions, that all “job vacancies” are cancelled, that travel will be severely limited, training reduced or deferred, projects declined or halted, equipment parked, sustaining capex cut, etc. And yes, sadly, there will be job losses involved,” said Lindsay in the letter.

“However, notwithstanding what we need to do on our general cost structure, we will need to maintain production levels.”

In a request for comment, Teck’s Manager of Social Responsibility, Nic Milligan, said no decisions have been made around specific cost reduction initiatives.

“We will provide updates as measures are implemented and as part of regular disclosure,” he said.

Milligan explained that the company is always closely tracking markets and taking steps to manage their costs in response to challenging conditions.

“As noted in our second quarter results, we are actively identifying further cost reduction initiatives that can be implemented quickly to ensure we continue to remain well-positioned,” he said.

Just Posted

A wildfire near Cottonwood Lake was put out by Nelson firefighters Sunday night. Photo: Submitted
Wildfire extinguished near Cottonwood Lake

Lightning-caused fire was near one of Nelson’s water sources

West Kootenay Regional Airport. Photo: Betsy Kline
Central Mountain Air leaving Castlegar airport in July

The airline says market can’t handle two airlines

Photo: Trail Times
Trail RCMP start June by nabbing impaired drivers

Latest brief from the Trail and Greater District police

“This is very costly to replace and it seems that Rossland is getting more and more theft and vandalism happening, which is really unfortunate,” says the commission’s Michelle Fairbanks. Photo: Submitted
Two plaques stolen from Rossland heritage square

The plaques were located at Washington and Columbia by the Olaus statue

No matter your age, the city’s two skate park hosts Jaryd Justice-Moote (left) and Brenden Wright can help you roll into a new pastime this “Summer at the Skatepark.” Photo: City of Trail
Free coaching at the Trail Sk8Park begins next month

The city is rolling into a summer of inclusive recreation by, for… Continue reading

Canadian Prime Minister Justin Trudeau participates in a plenary session at the G7 Summit in Carbis Bay, England on Friday June 11, 2021. THE CANADIAN PRESS/Adrian Wyld
Canada donating 13M surplus COVID-19 vaccine doses to poor countries

Trudeau says the government will pay for 87 million shots to be distributed to poor countries

RCMP Const. Shelby Patton is shown in this undated handout photo. RCMP say that Patton was hit by an allegedly stolen truck that he had pulled over on Saturday morning in Wolseley, east of Regina. THE CANADIAN PRESS/HO, RCMP
Pair charged in Saskatchewan Mountie’s death make first court appearance

Const. Shelby Patton was hit by an allegedly stolen truck that he had pulled over Saturday morning

David and Collet Stephan leave for a break during an appeal hearing in Calgary on Thursday, March 9, 2017. THE CANADIAN PRESS/Todd Korol
Appeal Court rejects stay for Alberta couple facing third trial in son’s death

Pair accused in their earlier trials of not seeking medical attention for their son sooner

Highway notices like this come down effective June 14. Public health restrictions on non-essential travel and commercial operation have hit local businesses in every corner of B.C. (B.C. government)
Province-wide travel back on in B.C.’s COVID-19 restart plan

Gathering changes include up to 50 people for outdoor events

Calgary Stampeders’ Jerome Messam leaps over a tackle during second half CFL western semifinal football action in Calgary, Sunday, Nov. 15, 2015.THE CANADIAN PRESS/Jeff McIntosh
CFL football will be played this summer in Canada

Governors vote unanimously in favour to start the ‘21 campaign on Aug. 5

Citizenship Minister Marco Mendicino holds a press conference in Ottawa on Thursday, Nov. 12, 2020. The federal government is announcing that Indigenous people can now apply to reclaim their names on passports and other government documents. THE CANADIAN PRESS/Sean Kilpatrick
Indigenous people can now reclaim traditional names on their passports and other ID

Announcement applies to all individuals of First Nations, Inuit and Métis background

Harvesting hay in the Fraser Valley. (Tom Fletcher/Black Press)
COVID-19: B.C. waives farm income requirement for a second year

Property owners don’t need minimum income for 2022 taxes

Cruise ship passengers arrive at Juneau, Alaska in 2018. Cruise lines have begun booking passengers for trips from Seattle to Alaska as early as this July, bypassing B.C. ports that are not allowed to have visitors until March 2022 under a Canadian COVID-19 restrictions. (Michael Penn/Juneau Empire)
B.C. doesn’t depend on U.S. law to attract cruise ships, Horgan says

Provinces to get update next week on Canada’s border closure

This undated photo provided by Girl Scouts of New Mexico Trails shows a scout donating cookies to firefighters in Rio Rancho, New Mexico, as part of the Hometown Heroes program. As the coronavirus pandemic wore into the spring selling season, many Girl Scout troops nixed their traditional cookie booths for safety reasons. That resulted in millions of boxes of unsold cookies. (Girl Scouts of New Mexico Trails via AP)
Thinner Mints: Girl Scouts have millions of unsold cookies

Since majority of cookies are sold in-person, pandemic made the shortfall expected

Most Read