- Teck Resources (TECK.A) has noted improving coal sales to China, as trade relations between the latter nation and Australia continue to deteriorate
- Due to political tensions with the Australian Federal Government, Chinese clients are looking to Canada and the U.S. source coal
- Accordingly, Teck’s fourth quarter coal sales have begun to improve, despite a poor overall macro-environment for coal
- As a result, Teck is currently on track to meet its previous coal sales guidance of 5.7 to 6.2 million tonnes, with around a fifth of the sales going directly to Chinese customers
- Teck Resources remains unchanged and is trading at $22.22 per share
A political spat between Australia and China is propping up Teck Resources’ (TECK.A) struggling coal business.
Due to political tensions with Australia’s Federal Government, China has been imposing numerous bans on the previously close export partner.
As a result, Chinese clients are looking elsewhere for sources of coal. Australia-China coal imports dropped 47 per cent in October, leaving manufacturers in Canada and the U.S. to make up the difference.
This has led to Teck noting an increase in China coal sales, despite a poor overall macro-environment for coal.
Due to the boost, Teck's fourth quarter sales remain within its previous guidance of 5.7 to 6.2 million tonnes, with around a fifth of the sales going directly to Chinese customers.
Improving its business logistics further, steelmaking coal prices in China are finally beginning to improve, after a prolonged slump that was initially triggered by the onset of COVID-19 and its subsequent downturn in global manufacturing. Teck's three most recent shipments to China were priced at between US$160 (C$209.38)and $165 (C$215.93) per tonne at cost and freight pricing.
Notably, spot sales to China hit an average premium of more than US$35 (approximately C$45.80) per tonne above Australian FOB spot pricing, showing customers are willing to pay a higher price for non-Australian coal.
As a result, the company expects its fourth quarter sales to reflect the overall long-term average decline of steel making coal, at 92 per cent. Before these premium sales to China and its other customers, the company has anticipated falling below this benchmark decline.
Shares in Teck Resources remains unchanged and is trading at $22.22 per share at 12:21pm EST.