Interesting article on the Coal Industry

I think the following will be of interest to some of my local readers from todays Financial Post:


Anglo coal settlement good news for Teck

The settlement of Anglo American’s metallurgical coal contract pricing at US$330 per tonne for the second quarter of 2011 bodes well for other coal producers such as Teck Resources Ltd.

Platts reported the April-June price achieved by Anglo American selling into several Japanese steel mills, which compares to US$225 per tonne for the January-March quarter.

Consensus for second quarter contract pricing appears to have been in the US$300 range, according to Desjardins Securities analyst John Hughes. He expected BHP Billiton to settle first for the quarter, although it had apparently been trying to negotiate a monthly, rather than a quarterly pricing period for 50% of its coal sold in a calendar quarter.


“We view Anglo American securing a historically high metallurgical coal price as positive for coal producers worldwide, including Teck Resources,” Mr. Hughes told clients.

While he acknowledged that pricing during the second quarter was influenced by supply constraints in Australia due to weather issues, the analyst believes tight supply and demand conditions in the seaborne market will remain a key factor through 2012.

Assuming Teck secures a similar price of US$330 for the second quarter, Mr. Hughes estimates its average realized metallurgical coal price (including lower grade material) will total US$308. That compares with US$208 for the first quarter.

He is forecasting earnings per share of $1.34 for Teck in the second quarter, compared with estimated earnings of $1.12 in the first quarter and actual earnings of 93¢ in the fourth quarter of 2010.

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