We Are In For The Long Haul In The Coal Shut Down
Walter Energy was bleeding so badly it is amazing to say the least that they were able to continue to produce coal in Tumbler Ridge and Chetwynd. It is obvious from first appearance that the mining of coal in the area will be curtailed over the long haul , and that Walter Energy can expect to see it's fortunes slip further.
Walter Energy paid 3.3 billion for Western Coal three years ago . Coal was selling on the open market for above $200.00 a tonne. Today that same coal will fetch you $120.00 a tonne US . Walter needs $132 dollars a Tonne in order to operate .
It is not hard to then understand that Walter Energy's stock prices have dropped to $512 million , a small portion of what they paid for the company.
So they are in a catch 22. China which uses the coal to make steel, has seen a slowing of growth along with a move to curtail operations in some of its dirtiest coal refineries and we all know that they know how to bargain hard given their past performances in the coal fields of the North if there is an abundance of product and a shortage of need.
So who is going to take the hit? Well first off it is the 700 workers employed at the mines. But it doesn't end there. There is a ripple effect. The coal trains and the crews that run them will be cut just as soon as the remaining finished product hits the rails. The people who maintain the tracks from this region will also get their walking papers. The off loading facilities in Prince Rupert will be shut down putting those workers on the bricks. Above all the Provincial government will see a significant drop in the royalties that they receive for the sale of the coal which, incidentally, is BC's largest export.
This latest news is not good for the region around Tumbler Ridge and Chetwynd and the affects will be felt into Prince George and area. Don't look for a short curtailment period, this shut down is set to last a long time.
I'm Meisner and that's one man's opinion.
Comments
No doubt this is bad news and the people of the region will be watching more closely the price of coal for the turn around.
Although I am not sure if the coal used for power plants is a factor here. I am of the understanding metallurgical coal is is for building things like buildings, cars, trains, and planes.
Strategically as a country if in a time of war this is still a huge national advantage having these resources turn key ready for our side. At a time when China has to deplete their resources ever faster to maintain growth, I am betting having a shortage of this kind of metallurgical coal is going to put limits on future growth of buildings, cars, trains, and planes and thereby begin to put a higher premium on those assets.
One has to wonder if the big LNG pipeline push couldn’t use affordable metallurgical coal to produce pipe in region as part of some of these tens of billion dollar projects? If so at least then we would have more certainty for the downtime.
The pipe used for the pipelines may very well be imported. Our steel industry has been in a decline for decades.
Perhaps the minimill in Salmon Valley could have a new look at it.
The linked article is just a few moths old, written after a plant in Hamilton was shut down in 2013.
http://opinion.financialpost.com/2013/11/05/canada-needs-a-steel-strategy
The Port of Prince Rupert exports both thermal and metallurgical coal. Year to date figures show a decline in coal shipments of 34.8%. One should keep in mind that a significant amount of coal from Wyoming USA is presently exported through Prince Rupert because of congested facilities on the US West Coast and Vancouver. With a reduction in exports in other areas this Wyoming coal could discontinue using Prince Rupert. (because of the high transportation costs) and Prince Rupert would (could) take another hit.
Furthermore the expansion of the Panama Canal in 2015 to accommodate Post PanaMex container ships could have an impact on containers being handled through Prince Rupert. These ships will be able to go from Asia to the Eastern USA bypassing the need to rail them. A reduction in inbound loaded containers, means a reduction in the available empty containers for loading to Asia. Thus lumber, pulp, paper, container traffic could be reduced.
So changes coming for Prince Rupert. Perhaps the proposed mines on Highway 37 will help, however indications are this ore will go through Stewart BC.
Tumbler Ridge was a ghost town for how long? History couldn’t possibly repeat itself!
I predict new owners or mining contractors in the future of these mines. How can a business stay operating when it is billions in debt?
For what it’s worth, a lot of those 700 lost jobs will have little effect on us. Many of them come from other provinces, and you pay your income tax based on your province of residence, so if their family is in Newfoundland, that’s where they pay their personal tax to. Probably going to hurt Westjet more than anyone, as they are no longer flying in and out.
No need for a book titled, “Peak Coal”. Wind turbines and solar panels near those closed mines. Yeah. That’s the ticket. Glad I didn’t buy a coal furnace. We are so advanced.
Its time we stopped exporting our dirty products for the Chinese to destroy our eco system. We should be ashamed that our greed is uppermost on our minds.
Cheers
If we ever stop exporting coal to China where ever will they get their coal? Sure glad no one else exports coal. Principles don’t pay the rent, pal.
The amount of coal that we export through Prince Rupert amounts to next to nothing when you look at the big picture.
ski50. I guess all the people from BC who work at Ft McMurray pay BC income tax, so its a trade off.
Yes, but what it means, is bad news in the oilfields can have a greater impact on us than bad news here because so many former tradespeople in the mills now work in Alberta, but still live here. That’s why Enbridge might just be a shell game for us, if the workers who build it are resident in other provinces, the tax benefit will go elsewhere.
Good link Gus, on the state of the steel industry here in Canada… it helps confirm a lot of the assumptions I had.
IMO a strong mayor for PG would be pushing linkage for a steel mill North of PG for the LNG pipeline industry social license. Not only would it diversify the industrial base of the North, but it would bring back those 700 jobs in our neighboring communities.
ski50, you are SO WRONG!! There are people living here that work ‘in the field’ at these mine sites. The folks that live there won’t come to PG for shopping, travel etc. Yes, there are workers from all over the area that will be affected. The trickle down effect is everywhere.
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