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TORONTO, May 28 (Reuters) - Teck Resources Ltd said on Thursday it will suspend production at its six Canadian steelmaking-coal mines for about three weeks in the third quarter so that it can align output and inventory with changing coal market conditions.
The Canadian miner said it will consider additional production adjustments over the course of 2015.
“Rather than push incremental tonnes into an over-supplied market, we are taking a disciplined approach to managing our mine production in line with market conditions,” Chief Executive Don Lindsay said in a statement.
The move will reduce third-quarter production by about 1.5 million tonnes, or 22 percent, to 5.7 million tonnes, with sales seen in the range of 6 million to 6.5 million tonnes.
Annual coal production is now estimated at 25 million to 26 million tonnes, down from a February forecast of 26.5 million to 27.5 million tonnes.
The coal market is over-supplied by 15 million-20 million tonnes, TD Securities analyst Greg Barnes said in a note. The production pullback from Teck, the world’s second-largest seaborne coal exporter, is a good start, but “only a drop in the bucket,” he wrote.
Teck’s guidance for unit operating and distribution costs for the year is unchanged, but mine stripping costs are expected to be C$65 million ($52.4 million) lower than forecast, due to lower production and diesel costs along with productivity improvements.
The miner said the shutdowns would be staggered over the summer months among its operations and that it would continue to meet all contracted and committed coal sales.
“We expect Teck will need to revisit further cuts in Q4 if the price weakness persists,” Barclays analyst Farooq Hamed said in a note to clients.
However, he flagged that Teck’s ongoing cost reduction program had reached annualized savings of C$640 million to date and that the company expects to surpass its 2015 margin improvement goal of C$100 million.
Shares of the Vancouver-based miner closed 1 percent higher on Thursday at C$15.09 on the Toronto Stock Exchange.
$1=$1.24 Canadian Reporting by Susan Taylor; Editing by Paul Simao; and Peter Galloway