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Teck provides steelmaking coal market update

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World Coal,

Teck Resources Ltd has announced that it has increased its steelmaking coal sales to China for 4Q20 in response to increased demand. These sales have been at higher pricing levels compared to markets outside China. Estimated total 4Q20 sales remain within Teck’s existing guidance of 5.8 – 6.2 million t, with approximately 20% of these sales now to Chinese customers.

Pricing in China for Teck’s steelmaking coal started to increase around the middle of the current quarter when a large portion of its overall sales were already concluded. Additional spot sales to China were concluded gradually as the price was rising and achieved an average premium in excess of US$35/t above Australian FOB spot pricing at the time each sale was concluded.

Its contract sales to Chinese customers are also priced on the basis of cost and freight (CFR) China price assessments. The most recent three cargos were sold at prices between US$160/t and US$165/t CFR China. In a declining coal price environment, the realised coal price relative to benchmark would normally be lower than the long term average of 92%. As a result of these recent sales at premium prices, however, the company is estimating that its 4Q20 realised price will reflect that long term average of approximately 92% despite the price drop for markets outside China where the majority of Teck’s steelmaking coal is sold.

The company has had detailed discussions with customers regarding 2021 sales and are restructuring itd sales book to target 2021 sales to China of approximately 7.5 million t. It cautions that these sales are subject to a range of risks including general market and economic conditions, general and specific port restrictions, Chinese regulation and policies, and normal production and operating risks. Teck aims to sell these tonnes at CFR China pricing which currently reflects a premium to Australian FOB spot pricing of approximately US$50/t.

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