of 600 workers
Around 47% of the profits realized by the company come from the metallurgical coal market supported mostly through the five mines in the Elk Valley.
According to Don Lindsay, Teck CEO, “Coal prices are at the lowest level since 2007 and margins are at the their lowest level in 10 years”.
He went on to say that, “half the reductions [are] expected to come from a 5% reduction in our workforce, which represents 600 positions”.
The announcement came as the company reported a 68% drop in adjusted first quarter profits due to low commodity prices.
The Vancouver-based company also noted that it will defer the restart of its Quintette coal project in British Columbia which has not been in operation since 2000.
Metallurgical coal prices continue to drop in the world market making projects such as the Quintette restart not economically feasible.
News agencies have confirmed that a large number of the job cuts will come from the coal side of Teck’s business with 80 coming directly from the Quintette restart project.
The company is doing a cost reduction program including 200 million worth of cost cuts along with a 150 million in capital spending.
To date the company, known to be tenacious in tough times, has already achieved a 345 million dollar cost reduction to present.
The coal business is the largest unit hit by the world economy due to coal prices. The last quarter of 2013 saw coal prices at $161 US. Prices have since fallen even more in the first quarter of 2014 to $143 US.
As the price of coal drops so does the company’s profits. Gross profits in the first quarter of 2013 were 994 million dollars as compared to the first quarter of 2014 at 732 million dollars.
We asked Nic Milligan, Manager, Community & Governmental Affairs about the following :
• The industry continues to face challenging market conditions for the commodities Teck produces.
• In response to these conditions, Teck is implementing additional cost reduction measures company-wide in order to maintain competitiveness and emerge stronger from the current price cycle.
• This includes reducing Teck’s global workforce by approximately 600 positions or 5%.
• Where possible, efforts will be made to achieve planned reductions through attrition – only critical vacancies will be filled.
• Detailed plans will be developed for each Teck site and office in the coming weeks, including Teck’s operations in the Elk Valley.
• Teck’s expected 2014 steelmaking coal production remains to be in the range of 26 to 27 million tonnes, depending on customer demand.
• While we believe that the longer term fundamentals for steelmaking coal are favorable, the recent weakness in some of these markets may persist for some time.
• Moving forward we will continue to assess and ensure our operations are aligned with market conditions.
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