April 1, 2010 / 3:28 PM / 8 years ago

UPDATE 1-CP Rail, Teck reach coal shipment deal

* 1-yr agreement on metallurgical coal

* Teck, CP plan longer term agreements (In U.S. dollars unless noted)

TORONTO, April 1 (Reuters) - Canadian Pacific Railway Ltd (CP.TO) said on Thursday it has reached a one-year agreement with miner Teck Resources TCKb.TO to transport metallurgical coal from its mines in southeastern British Columbia to Pacific Coast ports.

CP Rail, Canada’s second-largest rail company, said the terms of the contract terms are confidential, but rates will be similar to current levels.

In July, an arbitrator ruled that Teck could switch some of its export-bound traffic from CP to rival Canadian National Railway (CNR.TO) midway through its journey, in order to lower shipping costs.

The decision cut Teck’s freight costs, dropped a provision that pegged shipping rates to the price of coal and ended CP’s status as the only railway with a contract to haul coal from the five mines in southeastern British Columbia to Vancouver-area ports.

At the time, Teck said it expected average transportation costs, including rail and port costs, to be in the range of $33 to $35 per tonne for the 2009 calendar year.

CP Rail said the rates under the new contract are volume based. Should Vancouver export volumes fall short of target levels, a higher rate will apply.

“During the term of this new agreement, CP and Teck intend to enter discussions toward a longer term arrangement,” CP said in a statement. (Reporting by Euan Rocha; editing by Rob Wilson)

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