By Andrew Petrozzi
Asian demand for western Canadian coal is revitalizing Prince Rupert’s Ridley Terminals Inc. as throughput volumes of bulk products, particularly coal, are set to hit record levels in 2010.
The terminal expects to process about 7.5 million tonnes of throughput this year – most of which is coal and wood pellets – marking a substantial increase from 4.2 million tonnes in 2009. The previous record was 6.9 million tonnes set in 1999.
It’s a dramatic turnaround from 2005 when the Crown corporation processed just 1.1 million tonnes, generated $300,000 in net income on $5.5 million in revenue and needed $8.1 million from the federal government to meet its financial operating requirements.
By 2009, net income had grown to $3.3 million on $25 million in revenue, and the port had not received any federal government operating contributions since 2006.
Ridley Terminals interim chairman Bud Smith said the federal government’s requirement that the terminal become a commercial operation starting in 2006 triggered the turnaround.
According to Smith, the mandate for Ridley Terminals prior to 2006 was perceived to be cost recovery only.
“That mandate led to inadequate pricing of our services and throughput rates, which in turn led to an inability by Ridley Terminals both to sustain itself financially across the business cycle and to invest in a viable future.”
Smith added that market pricing allowed the terminal to upgrade its equipment and processes, which in turn further increased efficiency and productivity. A diversified customer base has also improved the terminal’s fortunes. Smith said employment has doubled to 96 employees from 48 in 2004-05.
Established in 1984 to handle coal produced from mines in northeastern B.C., Ridley until recently received 100% of its throughput from within the province.
According to Smith, that domestic percentage has now dropped to 55. While it’s still primarily coal, wood pellets have joined the product mix. Forty-two per cent of the terminal’s throughput now comes from Alberta, with an additional 3% originating in Saskatchewan.
“All the products that come from Alberta or Saskatchewan could go to other terminals,” said Smith. “The fact that we’re attracting that kind of volume means we’re doing it on a competitive basis, and we have chosen not to do it by the mindless process of just going to the lowest price.”
Smith said the terminal expects to process about nine million tonnes in 2011, and that based on purely organic growth from customers, the terminal would soon be able to fully use its capacity of 12 million tonnes.
“In 2005, Ridley was looking at a scenario where its survival was at risk,” said Smith. “A policy change was made in 2006 and now the issue for us isn’t survival. The issue is now pressure on our capacity.”
Japan (47%) is Ridley Terminal’s most significant shipping destination. China (23%) and South Korea (21%) make up most of the balance. Brazil (2%) and elsewhere (7% including Hawaii, Mexico and Europe) round out the total.
“Ridley has become an important link in the supply chain that sees Canadian-produced energy going into a world market where demand is increasing,” said Smith.
Asian steel mills will power the global economy and the coal industry out of recession in 2010, according to a presentation made by Allen Wright, president and CEO of the Coal Association of Canada to the 2010 Minerals North Conference this past spring.
With China driving demand, steel production is forecast to reach 600 million tonnes in 2010 compared with 570 million tonnes in 2009.
According to Wright, coking coal production in China cannot support this increased demand.
“China imported 34.5 million tonnes of coking coal in 2009, up 403% as compared to 2008,” he said. “At the same time, metallurgical coal exports dropped 95%.”
Wright added that export markets drive B.C. metallurgical coal production and that Chinese demand is expected to remain steady.
Ridley Terminals is working on securing funding approval for a second “dumper system” that would increase terminal capacity to 16 million tonnes. Add to that improved relations with local First Nations, a strong safety record and a more significant presence in the local economy and Ridley Terminal’s future is more promising now than at any time in the past decade.
“We don’t take anything for granted,” acknowledged Smith. “We understand that we’re in a volatile commodity business that goes up and down, but we’re taking seriously our mandate to operate in a commercial manner and we’ve done that.”