weak coking coal demand and Teck stock downgraded get real folks, the market is not strong for coking coal. if the big guys are hurting.....
Teck Resources Ltd. was downgraded at Canaccord Genuity after the firm cut its coking coal price and volume forecasts for the diversified miner due to weak market conditions.
Analyst Orest Wowkodaw noted that the recently settled fourth quarter benchmark price of US$170 per tonne represents a 24% decline from third quarter levels.
He also pointed out that spot prices for top quality hard coking coal have dipped to US$141 per tonne from US$226 in late June, reflecting very weak demand from the steel industry.
“If spot prices remain at current levels or slip further, the Q1/13 benchmark settlement is likely to also move lower,” Mr. Wowkodaw told clients.
The reduced estimates prompted the analyst to cut his price target on Teck shares to $37 from $39 and lower his rating to hold from buy.
Canaccord now forecasts Teck’s coking coal sales for the 2012-2014 period will come in at 21.8, 24.0 and 26.0 metric tonnes (Mt), respectively. That compares to 23.8, 25.0 and 26.0 Mt previously.
The firm also cut is fourth quarter benchmark price to US$170 per tonne from US$220, while leaving its 2013 outlook unchanged at US$179.
“In this type of pricing environment, we would not be surprised to see customers defer and/or renege on higher priced contracts,” Mr. Wowkodaw said. “Given the cost structure of the industry, we anticipate production closures and/or a rebound in coking coal prices within the next few months. However, in our view, Teck shares already reflect this scenario.”