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Teck Resources Ltd. will temporarily shutter its six Canadian metallurgical coal mines this summer, a move that will have ripple effects in other sectors of the Canadian economy.
The suspensions are Teck’s latest step to deal with weak commodity prices and a glut of supply in the market. The Vancouver-based company already reduced its dividend, cut 600 jobs and shelved plans to restart one of its mines in British Columbia.
But that was not enough to deal with the prolonged slump in metallurgical coal, which is used to make steel and is down 70 per cent over four years.
“Rather than push incremental tonnes into an oversupplied market, we are taking a disciplined approach to managing our mine production in line with market conditions,” Don Lindsay, Teck’s chief executive officer, said in a statement.
The move underscores the depth of the problem facing the steel industry. There’s a surplus of between 15 million tonnes and 20 million tonnes of metallurgical coal in the world. And China, the world’s biggest consumer of steel and metallurgical coal, needs less metal.
Teck will suspend each of its five mines in British Columbia and one mine in Alberta for three weeks over July, August and September.
That will cut about 1.5 million tonnes, or 20 per cent, from Teck’s quarterly production, although, globally, that is less than 10 per cent of the excess coal.
“While Teck’s move to lower production is a good start … the cut in and of itself is still only a drop in the bucket. More cuts are needed, in our view,” TD analyst Greg Barnes said in a research note.
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