Teck’s gross profit before depreciation and amortization from its coal business unit declined by $C224 million ($A218 million) in the March quarter compared with a year ago, primarily due to lower coal prices, higher unit costs and a $30 million inventory write-down.

Gross profit came in at $292 million for the quarter.

These items were partly offset by the favourable effect of a stronger US dollar.

Production in the first quarter of 6.7 million tonnes rose by 8% compared with the same period a year ago as a result of higher capacity utilization within the business unit.

Coal sales of 6.2Mt in the first quarter were 6% lower than the same period last year.

“Demand for our products is healthy, however rail performance negatively affected our logistics chain and some vessels experienced delays at west coast ports resulting in lower sales for the quarter,” the company said.

“The average coal price of $US131 per tonne was 19% lower than the same period a year ago and reflects the oversupplied steelmaking coal market conditions.”

Property, plant and equipment expenditures totaled $79 million in the first quarter and included $62 million for sustaining capital, $13 million for major enhancement projects and $4 million for new mine development. Capitalized stripping costs were $131 million in the first quarter compared with $140 million a year ago.

Mining and coal processing performance in the first quarter was strong, with record monthly coal production in January.

Cost reduction efforts at the mines have been successful and are ongoing. Labour costs per unit are lower than the first quarter of last year as labour productivity has improved. In addition, we continue to limit the use of high cost equipment and maintenance contractors and have maintained restrictions on hiring while minimizing overtime.

However, pricing pressure on key inputs such as diesel and natural gas, partially as a result of the strengthening of the US dollar against the Canadian dollar, combined with longer haul distances and additional maintenance activities contemplated by its operating plan, has resulted in higher production costs this quarter than a year ago.

Rail volumes moved were less than expected, with CP moving 600,000t less than planned westbound from southeast British Columbia.

CP attributed under-performance to the effect of cold weather east of the Rockies, equipment availability and congestion within the rail network as a result of increased grain volumes. CN moved planned quantities in the northern corridor.