Sept/Oct 2007

Branding Elk Valley Coal

By H. Ednie

On August 17, 2006, Boyd Payne took over the leadership of Elk Valley Coal, the second largest producer on the seaborne high-quality coking coal market. Payne’s history in the coal industry is impressive - originally a chemist, he left the oil industry for coal in 1974, found it a fascinating industry, and has been an avid participant since. Originally from Coleman, Alberta, in the Crowsnest Pass and not far from the bulk of Elk Valley’s operations, he gravitated to marketing in the 1990s and spent five years in Singapore for BHP Billiton in their coal marketing department. It offered him the vantage point to see things from another angle and develop a different perspective. He brought that global focus back to Elk Valley last year, and the company’s been driven by renewed energy since his arrival.

CIM caught up with Payne on his one-year anniversary with Elk Valley, to discuss the global metallurgical coal market and his approach to maintaining a leading position for the company.

CIM: What is the situation for Elk Valley Coal today and the hard coking coal market?

Payne: We’re selling 23 million tonnes annually, making us the second largest supplier of seaborne high-quality coking coal, after BMA (BHP Billiton/ Mitsubishi). We live in the export world; 35 per cent of our product goes to Europe and the surrounding areas, 10 per cent to South America, and another 10 per cent to North America, while the remainder is shipped to Asia.

Hard coking coal has realized indirect benefits from the China phenomenon. The increase of rapid development in the BRIC nations (Brazil, Russia, India, and China) has seen the global steel industry prices increase, and steel companies are much healthier today, resulting in a change in their operational approaches. One way is they are seeking more higher quality raw materials, and the price of hard coking coal has virtually doubled.

CIM: What situation do you foresee for the future? Are there any risks that might threaten today’s strong market conditions?

Payne: Going forward we will have increasing demand, but increasing volatility as well. The situation in China exhibits the opportunity for huge changes, due to the immaturity of their financial structures. History predicts there will be discontinuities, resulting in volatility. As we sit here today, the entire market is affected by global developments - the sub-prime crisis out of the United States is an example. If China were to experience a major banking crash, we’d see major changes in our markets.

CIM: So how does a company prepare for potential market fluctuations and shifts?

Payne: You have to look at where you are on the cost curve. In our case, we also looked at the quality of our product, and are now driven to produce the best quality as fast as we can, at the best costs we can achieve. It means continuous improvement. You can’t be lulled by today’s prices - that’s a trap. You have to first understand your role and position on the marketplace to then best situate yourself to deal with any fluctuations.

Over the past year, we’ve dramatically increased the quality of our products and improved our capabilities to produce the high-quality product. Most of our reserves, about 90 per cent, are hard coking coal. We have been working to create the best products from those reserves. Our plan, logistics, port facilities - everything is now blended for the customers’ benefit.

It’s about building your brand. We’ve built a strong brand and must be a slave to maintaining consistency. We have repositioned this year as the reliable second largest supplier of seaborne high-quality coking coal in the world. The world is moving at an ever-faster pace. We must up our game.

CIM: Everyone is talking about climate change today. How has Elk Valley Coal responded to the call for action?

Payne: Certainly we all have to pay attention to climate change and take responsibility for our part. At Elk Valley Coal, we export our product to other countries to be consumed by the steel industry. So we work with our customers to provide value to decrease their footprints. The focus is on technologies and efficiencies. In our operations it’s just good business.

CIM: You speak about repositioning the company, of continuous improvement, and quality. How do you manage such focused change across existing operations?

Payne: The focus must be on quality, excellence of execution, understanding our role in the world, and doing the right thing with it. We have the knowledge and the team to execute. At Elk Valley, we’ve recognized that true behavioural change and improvement strategies must be across every aspect of the company. People traditionally thought of our assets as the hard tangibles, such as trucks and shovels, but today, we know our assets are everywhere - they include the people, customer equity, and so on. Everything must be examined from the same knowledge perspective and we must keep on improving.

CIM: It sounds like you have your hands full at Elk Valley and are relying on your team to realize some major changes.

Payne: It’s true, and we have the right people to make it happen. I love this business. The global mining community is relatively small and full of fascinating people. Business is business - what matters is the people. And so I’ve enjoyed my years in the mining industry.

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