Skip to main content

Petroleum Coke at Ridley Terminals a bulk handing facility for mind coal and petroleum coke in Prince Rupert June 24, 2008.JOHN LEHMANN

A federally owned coal-shipping operation in northern British Columbia is placing its expansion on hold for up to five years, getting only halfway toward its goal to double the terminal's capacity.

Ridley Terminals Inc., a Crown corporation put up for sale by Ottawa nearly two years ago, has been ramping up its capacity in anticipation of increased coal exports to energy-hungry customers in Asia. Some industry observers estimate Ottawa might have been able to fetch $1-billion had the government sold the operation in early 2013.

But as coal prices spiralled downward over the past couple of years, producers vastly scaled back or cancelled exports. Interest among prospective buyers of Ridley has waned and the terminal's market value declined. In less than two years, Ridley has gone from scrambling to keep up with surging demand to now having excess capacity – plenty of new equipment but dwindling supplies of coal that arrive in railcars at the Port of Prince Rupert.

During a tour last week, no ships waited to be loaded at the Ridley berth, and some conveyors used to help stockpile coal were halted. Ridley, which loaded its first coal ship in 1984, leases land from the Prince Rupert Port Authority.

In early 2011, Ridley had shipping capacity of almost 12 million tonnes annually before embarking on a $255-million, multiyear expansion in an effort to reach 25 million tonnes a year by the end of 2015. After the initial phases of construction, the terminal's capacity rose to 15 million tonnes annually in 2013 and is targeted to be at 18 million tonnes annually by the end of 2014.

But the expansion will be suspended for up to five years once it hits 18 million tonnes of annual capacity, disrupting Canada's hopes for a coal exporting bonanza from the Ridley site to Asia. That annual throughput for coal and petroleum coke is expected to be high enough for Ridley to handle demand for shipments until the end of 2019, Ridley chairman Byng Giraud said in an interview.

"We're just slowing down the expansion. We've slowed down the pace," he said. "We don't anticipate that we'll need more than those 18 million tonnes a year for the next five years or so. But to say it's all suspended is not exactly true. We need to be flexible should coal prices recover. Should things go better, we could ramp the expansion back up."

For now, the outlook for the coal market appears bleak for the foreseeable future, given a glut of supplies from countries such as Australia and Indonesia.

Over the years, a variety of Canadian and U.S. coal producers have reserved space through Ridley. Low coal prices, however, have hammered the industry. In northeastern British Columbia, coal mining firms have either closed or suspended operations over the past 20 months.

Ottawa hasn't shelved its planned sale of Ridley in a process overseen by Canada Development Investment Corp., but Mr. Giraud said it is common sense for any seller to know that divesting a still-valuable asset during depressed times would be foolhardy.

"This is still a profit-making and successful operation," he said. "Coal prices have gone down, and you have to reassess if it is the best time to unload the asset. You have to get the best value for the taxpayer."

Prices for metallurgical (or coking) coal, a key ingredient used in the production of steel, tumbled to roughly $120 (U.S.) a tonne earlier this year after surpassing $300 in 2011. In the first 10 months of this year, Ridley handled nearly 4 million tonnes of metallurgical coal exports, down 40 per cent from 6.6 million tonnes for the same period last year.

Since 2011, benchmark prices for thermal coal (used by power plants to generate electricity) have slumped more than 50 per cent to roughly $63 a tonne. Last month, Ridley didn't export any thermal coal, compared with more than 335,000 tonnes in October of 2013.

Including metallurgical and thermal coal, as well as petroleum coke, the Ridley terminal handled 6.46 million tonnes in the first 10 months of this year, down 38 per cent from 10.52 million tonnes in the same period last year.

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe