Western Canadian Coal plans to cut output as customers defer shipments
miningweekly.com
By: Liezel Hill
Published on 6th January 2009
TORONTO (miningweekly.com) – Vancouver-based Western Canadian Coal plans to reduce production at its Brule and Wolverine mines, in British Columbia, in response to rising inventory levels linked to the deferral of shipments by some customers.
At the Brule mine, which produces low-volatile pulvarised-coal-injection coal, production will be lowered to about 750 000 t/y from the end of January, from a current rate of 1,3-million tons a year.
WCC has also informed employees at the Wolverine mine “that it may curtail operations effective May 18, 2009, subject to market conditions for the next coal year”.
The company has given a notice of termination to the mining contractor at the operation, and will switch to owner mining when operations resume.
Wolverine is currently operating at an annual run rate of 1,6-million tons a year of coal.
"The reduced operating rates are a result of rising inventory levels as some customers defer shipments through the next few months," WCC said.
"With the current production curtailments taken by some customers, along with the uncertainty of the coal markets beyond April 2009, the company has made these prudent decisions."
However, president and CEO John Hogg emphasised that the curtailments were contingent on the demand for metallurgical coal over the coming year.
Coal pricing contracts are agreed to on a yearly basis, and are renegotiated to take effect in April of every year.
Demand for the steelmaking ingredient has been affected by the global economic downturn, and coal-miners including Teck Cominco have warned that they have seen customers beginning to defer shipments, and indicated that prices may decline sharply this year.
"Whether we reduce operations and to what levels, will depend on the demand for our coal," Hogg said on Tuesday.
"We hope this will become clearer in the coming months."
WCC shares fell 13% on Tuesday morning, to C$0,93 apiece by 10:22 in Toronto. |
