The market’s reaction to Teck Resources’ (CN:TECK.A) expected realised coking coal price announced late last week shows a misunderstanding of how the stock’s coal business works and an underappreciation for the overall business, according to BMO Capital Markets.
Teck said second quarter 2017 prices for coking coal sold under quarterly contracts had been established based on an average of three assessments – a new system for Teck that will be carried forward – resulted in an average price of US$190 per tonne.
This fed through to an average realised coal price for Teck of US$160-165/t, considerably lower than the quarterly benchmark price and Teck’s usual average realised price for the second quarter.
The world’s second-largest seaborne exporter of coking coal said steel mills had “filled their prompt requirements immediately following the Queensland cyclone”, leading to “very few” prime hard coking-coal spot sales during the four-week period from mid-April.
Coking coal sales volumes for the second quarter were expected to be 6.8-7 million tonnes, though final numbers will depend on timing of shipments.
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