March 15th, 2017 ~ Vol. 87 No. 11
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The state of the coal industry update
Teck Coal’s Nic Milligan invited to speak at Chamber Luncheon
Crowsnest Pass Herald Front Page
ANNA KROUPINA
Pass Herald Reporter
Nic Milligan, Manager of Community and Aboriginal Affairs at Teck Coal in Sparwood, spoke at this month’s Chamber of Commerce luncheon on March 8.

Milligan, who has been working at Teck for 21 years, provided an update on coal operations in the Elk Valley, the general state of the industry and the future outlook for coal.

Milligan highlighted that Teck operations mine for steelmaking coal, not the thermal coal that the federal government intends to phase out. Out of a global coal production amount of approximately 200 million tons annually, Teck produces approximately 25 million tons of coal a year that is then exported to North America, Europe, Latin America and, in the last few years, China.

Current state of coal

According to Milligan, the past four years have been the worst that he can remember in the coal industry. The current coal market, he says, has been in a volatile state since the turn of the century.

Coal prices hovered at approximately $100 per ton for many years going back to the 70s with very slow growth. In 2011, prices spiked dramatically upwards of $300 per ton due to floods, labour disruptions, mine collapses and the Chinese market suddenly becoming accessible by foreign coal producers. But $300 per ton of coal, says Milligan, is simply not sustainable.
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“The steel mills can’t afford that price,” he says. “They will sit on the stockpiles that they’ve accumulated at the lower prices and they will draw those down until they absolutely need to buy coal.”

The price spike amassed new coal producers in the United States who saw an opportunity to profit, contributing to an oversupply in the market and leading to a steady decline in coal price in the mid part of 2016. In August 2016, the industry saw a price spike in the cost of coal, the effect of American producers ceasing operation and the Chinese government reducing the number of yearly coal production days.

“Right now, we hover around $162USD per ton for Canadian steelmaking coal,” says Milligan. “It’s still a good price for us. We’re still cash positive at that price, but we don’t know if that’s actually bottomed up or if that’s the new normal.”

For that reason, Teck’s current focus is remaining cost-disciplined in order to protect the financial considerations for shareholders and employees, and to successfully cope should the price of coal drop further.

Intent for the future

Going into 2017, Milligan identified several areas of focus for Teck: continued consideration for safety, achieving the goals and objectives stipulated in the 2017 budget, increasing diversity in the workforce and continuing to advance their relationship with the Ktunaxa Nation in the context of impact management and benefits agreements.
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“We’re relentless in our pursuit of doing better. We will strive to better the budget in the key areas of safety, production, productivity and costs and we are ready to change course when necessary in this volatile market,” says Milligan.

Teck has also begun operations at the Baldy Ridge Expansion Project that advances the Elkview operation’s mine life from 2024 to 2045. Teck is currently hiring after a longtime freeze.

Coal Mountain Operation

The Coal Mountain Operation in Elk Valley, whose employee workforce consists 50% of Crowsnest Pass residents, will be terminating at the end of 2017. Milligan says Teck has made a commitment to those employees that they will have uninterrupted employment until that time.

“We’re working with each of our communities to develop comprehensive closure plans and taking their input and what do they need and want to see in their landscape when we’re finished.”
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March 15th, 2017 ~ Vol. 87 No. 11
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