CN, Teck announce long-term coal shipping agreement

CN and mining company Teck Resources Ltd. today announced a long-term rail agreement for the shipping of steelmaking coal from Teck's four British of Columbia operations between Kamloops and Neptune Terminals, and other west coast ports.

The agreement, which runs from April 2021 to December 2026, will enable Teck to significantly increase shipment volumes through an expanded Neptune Terminals.

The agreement also calls for CN to invest more than $15 million to enhance rail infrastructure and support higher volumes shipped to Neptune, CN and Teck officials said in a joint press release.

"This agreement and the associated infrastructure investment will provide us with rail capacity to match the major upgrades underway now at Neptune Terminals,” said Teck President and Chief Executive Officer Don Lindsay. "We expect this will lower our total transportation costs and improve overall rail and terminal performance."

Financial terms of the agreement were not disclosed.

"This significant volume commitment from Teck is further proof of CN’s ability to serve our customers into Canada’s trade gateway on the west coast," said CN President and CEO JJ Ruest. "This agreement also further enhances CN’s role as a supply chain enabler for Teck’s shipments into Neptune Terminals."

Meanwhile, Canadian Pacific's 10-year agreement with Teck will end in March 2021. In light of yesterday's CN announcement, CP officials said the railroad will continue to work with Teck to develop customized service tailored to the mining company's future shipping needs.

"We have long valued Teck as a customer and will continue to be an important supply chain enabler for them from their mine sites to our interchange with CN at Kamloops," said CP President and CEO Keith Creel in a press release. "This announcement will allow us to focus on other, value-added opportunities from Kamloops to Vancouver. We are excited about the capacity opportunities this creates for us, to and from the west coast, and look forward to finding win-win opportunities for other customers within this integral corridor."

The movement from the mine sites to Kamloops represents about two-thirds of the journey Teck's coal currently makes along CP's network. Based on CP's current estimates and assumptions with respect to its performance and financial condition, CP officials estimate that the change in length of haul for the affected volume could, without the addition of offsetting volumes, negatively impact earnings by about 1 percent in 2021.

"There is a significant amount of work required to ensure that the interchange at Kamloops is capable of accommodating the additional interchange volume in April 2021, and CP expects that all stakeholders will do their part. We will be working hard between now and Q1 2021, and beyond, to protect our fluidity through Kamloops for all shippers dependent on this critical corridor," Creel said.