07.14
Westshore’s Elkview met coal contract with Teck expires March 31, 2010.
Under the contract, Teck’s Elkview mine is obligated to ship all its
westbound coal through the terminal and is subject to price participation.
Currently, we are assuming the original terms of the contract are extended.
That said, the recently completed arbitration process between CP and Teck
resulted in a new rate structure no longer linked to the price of Teck’s coal
products, which it had been under the last two years of the previous fiveyear
agreement (expired March 31, 2009).
We view the CP contract as a benchmark agreement and believe there is
increased risk that Westshore’s renegotiated Elkview contract could have
less price participation and/or less volumes move through Westshore (i.e.,
more through the 46% Teck-owned Neptune facility).
Western Coals announcement on Tuesday, September 29th that they will aggressively be expanding capacity is a major benefit for volumes at Westshore Terminals at Roberts Bank. WTE is looking to expand and highlighted exporting to China and India as keys to their decision. Further, Westshore Terminals have been and continue to improve efficiency unloading trains and have acquired some new equipment to help move the coal more effectively.