New deal between Ridley Terminals and Teck Resources will increase coal exports

Ridley Terminals Inc. (RTI) announced on Jan. 8 the signing of an expanded commercial agreement in conjunction with Teck Resources Limited (Teck). The increased contract will raise the number of steel-making coal shipments leaving Prince Rupert for international markets.

“Teck is a longtime, valued customer of RTI,” said Marc Dulude, president and COO of Ridley Terminals Inc. “This agreement further solidifies our strong relationship and demonstrates our commitment to our customers to provide fast, efficient, and reliable services. RTI is proud to be a part of Teck’s long-term development plan and vision.”

Under the six-year agreement, which will start January 2021, coal shipment capacity could increase from the current three million tonnes per annum (mtpa) to six mtpa. The agreement gives Teck the option to enhance numbers of further shipments up to nine mtpa.

The use of Ridley Terminals will provide Teck greater flexibility and will improve performance in the steel making supply chain.

The coal shipment supply chain processes start at the mines where it is crushed and washed. It is then loaded into open top rail cars. The product is shaped and contoured into a loaf of bread shape and sprayed with a surfactant. The glue-like coating is meant to prevent particles and dust from polluting the environment during transportation. Once the coal arrives at the shipping terminal, the company said it is processed and constantly sprayed prior to it being loaded onto ships for export or stored in stockpiles on site.

READ MORE: Canada divests from Prince Rupert’s Ridley coal terminal, First Nations to get portion

“This agreement with Ridley Terminals, in combination with upgrades underway at our Neptune Terminal and our recent agreement with CN, will contribute to improved overall performance through out our steel-making coal supply chain,” Don Lindsay, president and CEO of Teck, said. “We are looking forward to building on our strong working relationships with RTI and new principal owners, Riverstone-AMCI to safely and efficiently transport our product to our customers.” Under a limited partnership agreement, Metlakatla First Nation and Lax Kw’alaams Band also own shares of Ridley Terminals.

However, not everyone is happy with the agreement.

Teck also has shipping agreements with Westshore Terminals Investment Corp. (WTE) for steel-making coal exportation in Delta B.C, and Neptune Terminals in Vancouver. Investors of WTE are worried about the sell-off and drastic 10 point drop in stock after the RTI and Teck agreement was announced.

BNN Bloomberg media host of “Commodities” and financial analyst, Andrew Bell, referred to Ridley Terminals as the “rival” of WTE.

“What a terrible surprise to wake up to,” said one investor who spoke with Bell on the Jan. 9 show.

“It does look like a huge blow to Westshore because Teck is talking about doubling it’s volume with rival Ridley … This could take business away,” Bell said during the program.

“The sell-offs are ten per cent down. This is really, really, dramatic. You wouldn’t expect it,” said Commodities guest, Michael Sprung, president of Sprung Investors. “Overall some people have questions about health in the coal market. This company needs higher volumes to have a catalyst. With the fear of Teck going to a competitor, it has hurt the stock.”

READ MORE: Another positive year for Ridley Terminal, coal shipments leading the way

The RTI and Teck agreement, in theory, provides Teck the option to almost completely remove Westshore from its supply chain and to utilize Neptune and Ridley, Bell said. “However, we believe that Teck is looking to utilize some combination of all three west coast terminals, trading off the incremental real costs up to Prince Rupert against supply chain diversification and what we assume will be priority shipping”, said Bell in a Twitter tweet.

WTI has operated since 1970 in the Port Metro Vancouver. It ships 33 million tonnes of coal annually providing billions in export dollars to B.C. and Canada.