Demand for Teck Resources Ltd.’s metallurgical coal remains strong and the FOB price has risen from $356 per metric ton (mt) at the end of December to $445/mt. At the same time, record high met coal inventories at its mines are expected to result in sales exceeding production by 1.2 million to 1.5 million mt in 2022. The strong pricing environment and increased sales volumes should result in strong cash flow in the first half of 2022, the company said.

Weather conditions continued to negatively affect infrastructure recovery efforts in British Columbia. Interruptions and substantial reductions to rail service and port activities persisted from mid-November into the first two weeks of January as extreme cold-weather conditions followed heavy rains and mudslides, which affected critical transportation corridors. The provincial state of emergency declared on November 17 was lifted on January 18.

As a result, Teck said its realized fourth-quarter coking coal sales were 5.1 million mt, slightly below the low end of the company’s previously revised guidance of 5.2 million to 5.7 million mt. For 2021, Teck’s coking coal production was 24.6 million mt. Strong logistics chain performance leading up to the heavy rain events, including at an expanded Neptune port facility, resulted in historically low coking coal inventories at the company’s operations, mitigating impacts on production volumes, according to the company.

Ongoing weather-related logistics challenges have continued through January and coking coal inventories at the mines are currently near record-high levels. The company said further transportation disruptions have the potential to require production cutbacks to manage inventory levels. The Canadian railways serving the district have reported meaningful progress on recovery in mid-January, with demonstrable improvements in rail shipments. The company said it expects to substantially recover delayed fourth quarter sales in the first half of 2022.

The company said a recent surge in COVID-19 cases also has the potential to derail operations. An increase in cases in southeastern British Columbia has resulted in rising absenteeism at Teck’s coking coal operations in the Elk Valley. While the absenteeism has so far not had a major impact on production, the situation poses a risk to Q1 2022 production. However, in recent days, the company said it has seen some improvement, with the number of employees returning from COVID-19 isolation exceeding the number of new cases.