Railroad shipping: CP, Teck reach 10-year deal for coal exports

Class I railroad carrier Canadian Pacific Limited and Teck Resources Limited said they have inked a 10-year deal in which CP will transport Teck’s steelmaking coal from five Teck-owned mines in southeast British Columbia to Vancouver-area ports.

This arrangement is expected to begin on April 1, 2011.

CP officials said this deal reflects the companies’ commitment to work together to achieve growth in the volume of coal shipped through a range of economic and marketplace dynamics and provides for flexibility over the long term, as well as provide for CP investments that enhance coal handling capacity to provide for Teck’s volume growth.

In April, CP and Teck reached a one-year agreement for CP to transport metallurgical coal from Teck’s CP-served mines in southeast British Columbia to Kamploops- and Vancouver-area ports for export. When this deal was struck, CP said that during the term of this contract, CP and Teck plan to discuss a longer-term arrangement.

“CP is delighted to have participated in the creation of a unique and collaborative agreement that sets the foundation for the next decade,” said CP President and CEO, Fred Green in a statement “Our ongoing dialogue has provided new and deeper insight into Teck’s growth objectives. Importantly, the agreement provides the stability and confidence to grow our business and enhance this world class supply chain for our mutual benefit.”

In 2009, CP carried roughly 305,000 carloads of coal, and in 2008, CP carried approx 318,000 carloads of coal. The majority of these carloads are Teck coal, CP told LM.
“Teck Coal Limited mines in southeastern British Columbia produce high quality metallurgical coal,” said Mike LoVecchio, CP Senior Manager-Media Relations, in a previous interview. “The coal is largely exported to processors in Asia via coal terminals at the Port of Vancouver. Canadian Pacific tracks directly connect Teck’s coal mines and the terminals, providing an integrated export supply chain. CP runs unit coal trains in a dedicated loop between the mines and the Coast.”

JP Morgan analyst Tom Wadewitz commented in a research note that there is likely incentive for both parties to work together to grow volumes and increase capacity between the mines and the Vancouver ports., adding that he suspects CP will pursue expensive infrastructure investment along its main line in the Canadian Rockies.