Teck bullish on coal, but not enough to add production capacity

TORONTO – Teck Resources is bullish on steelmaking-coal prices, but not enough to add production capacity, said the head of Canada’s largest diversified miner.

“I’m feeling excited,” Teck CEO Don Lindsay said Monday in a Bloomberg TV interview. “In the last 10 days we’ve seen a clear change in direction in coal prices,” with a surge in forward prices for the material that’s used to make steel, he said.

The possibility that China could reinstate coal output restrictions at the end of March and its decision to stop importing coal from North Korea are supportive of prices, Lindsay said at the BMO Capital Markets metals and mining conference in Hollywood, Florida.

While the Vancouver-based company has additional metallurgical-coal capacity that it could bring into production fairly quickly, it has no plans to do so until the steel business in India appears to “be really taking off,” he said.

“In this business, if you add too much capacity you put the market into surplus and you hurt the whole rest of your production,” Lindsay said. “If we brought out another three-million to four-million tons and ended up causing a price reduction, you can’t make the money back.”

Any new protectionist policies under the US administration are unlikely to affect the company very much because 95% of Teck’s coal sales go to Asia and Europe, Lindsay said. Teck is watching Chinese policy much more closely than US President Donald Trump’s policies, he said.

Lindsay said he expects declines in zinc treatment charges in the industry’s current round of negotiations. He also says the global copper market “may be tighter than we thought,” with an deficit expected to start around 2019.