A prolonged metallurgical coal glut is prompting Teck Resources Ltd. (TSX.B:TCK) to temporarily idle its six coal mines, five of which are in B.C.
The company announced it plans to implement staggered shutdowns over the summer, with each mine to be idled for three weeks.
The temporary closures will affect roughly 4,400 workers, according to Teck. Most of those workers are in B.C.
The temporary shutdowns follow four longer-term coal mines closures announced over the last two years by both Walter Energy Inc. (TSX: WLT) and Anglo American PLC.
Teck plans to take about 1.5 million tonnes out of production for the third quarter – a reduction of 22% of what it would normally produce.
"Rather than push incremental tonnes into an over-supplied market, we are taking a disciplined approach to managing our mine production in line with market conditions," Teck CEO Don Lindsay said in a press release.
"We will continue to focus on reducing costs and improving efficiency to ensure our mines are cash positive throughout the cycle and well-positioned when markets improve."
Metallurgical coal represents about 39% of Teck’s business. It also operates copper and zinc mines, as well as the Trail zinc and lead smelter.
Alex Hanson, president of local 9346 for the Unite Steelworkers, which represents more than 800 workers at Teck’s Elkview mine, said each mine is taking 20 days downtime, in rolling increments of a few days at a time.
He said it was a reasonable approach to cutting production.
“This is a business move to relieve some of the downward pressure on an oversaturated market right now and it’s better than layoffs,” he said. “It’s better than a single closure at a single mine for an extended period of time.”
A global glut has dropped met coal prices from more than US$300 per tonne in 2011 to a six-year low of US$109 per tonne.
Earlier this month, Jean-Sébastien Jacques, CEO for coal and copper at Rio Tinto (LON:RIO) said he expects it will take three to four years before metallurgical coal prices recover.
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