Teck will be temporarily scaling back production at their steelmaking coal operations and taking vacation downtime throughout the year as a result of high inventory and “logistics issues” such as the recent rail blockades, extreme winter weather conditions, and port constraints.
From an anonymous source, MyEastKootenayNow.com was able to obtain a letter sent from Teck Coal on February 26, 2020, to its employees and contractors at Fording River Operations, notifying them of the changes this year. As well, MyEastKootenayNow.com reached out to Teck Coal for comment and received written statements on the matter from Nic Milligan, Manager of Social Responsibility for Teck Coal.
“Due to logistics issues we are starting 2020 with record high site inventory levels,” said Milligan. “In addition, we are implementing a temporary construction shutdown at our Neptune Terminal in North Vancouver.”
According to the letter sent to employees, those logistics issues impacting sales and production include continued “rail and port constraints as a result of extreme winter weather conditions and recent rail line blockades”.
Milligan said the record high inventory means they will scale back production in 2020.
“As a result, Teck will be temporarily reducing production and our steelmaking coal operations will be taking periods of extended vacation downtime over the balance of the year.”
“The specific downtime will vary between the operations, with all employees being kept up to date as plans are implemented.”
According to the letter to Fording River employees and contractors, production will be reduced from 8.6 million tonnes to 7.45 million tonnes with a vacation shutdown between August 2nd and August 16th.
“Employees will be required to schedule vacation during this time,” reads the letter.
Milligan said employees are encouraged to take their vacation during the vacation downtime periods to ensure they have coverage when the mine is not operating.
“Our goal is to minimize the effect to the operations and employees and contractors,” Milligan wrote to MyEastKootenayNow.com.
Teck’s unaudited annual and fourth-quarter results for 2019 showed the company lost nearly $1 billion in earnings from the previous year. According to the results, Teck reported EBITDA (earnings before interest, tax, depreciation, and amortization) of $4.3 billion in 2019, down from $5.4 billion in 2018. The unaudited adjusted profit for 2019 was reported to be $1.6 billion ($2.77 per share) compared to $2.4 billion ($4.13 per share) in 2018.
Don Lindsay, President and CEO of Teck said in the release of the 2019 unaudited annual and fourth-quarter results, that there were a number of factors that affected their earnings.
“Ongoing global economic uncertainty negatively impacted commodity prices in the fourth quarter and that has continued into 2020, exacerbated by the effect on markets from the Coronavirus and the impact of severe weather conditions in British Columbia, followed by blockades on rail lines,” said Lindsay. “Our focus remains on those aspects of our business within our control.”
One of those aspects included, “taking steps to improve our steelmaking coal logistics chain.”
Teck said the first-quarter numbers for 2020 are being negatively affected, with the estimated impact being in excess of 1 million tonnes of steelmaking coal.
“As a business unit, we have worked through these difficult issues in the past and will do so again,” reads the letter from Teck Coal to Fording River employees. “As always, our primary focus will be on ensuring the health and safety of our people as we manage our way through these challenges.”
Teck Coal made it clear to the employees in the letter that they are trying to minimize the impact as much as possible and that details of the vacation downtime may change as more information becomes available or as the situation changes throughout the year.