Teck Resources cut at Morgan Stanley, seeing 'a bit more pain before the gain'

Jun. 23, 2022 3:56 PM ETTeck Resources Limited (TECK), TECK.B:CABy: Carl Surran, SA News Editor4 Comments

Train loaded with export black coal rounding a curve

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Teck Resources (NYSE:TECK) -9.5% in Thursday's trading amid a rout in prices for industrial metals and a downgrade to Equal Weight from Overweight at Morgan Stanley, which says the shares have gained roughly a third YTD while outperforming other miners.

While Morgan Stanley's Carlos De Alba sees value in Teck's (TECK) asset base and higher free cash flow following the completion of the QB2 project, he believes the likelihood of declining met coal prices will hold down the stock's performance; the firm forecasts met coal prices will fall to $281/ton in 2023 from current spot prices of $386/ton.

Weakening global growth will continue to weigh on mining equities in the Americas a bit longer, but once current macro risks recede, De Alba anticipates stronger secular demand for metals, driven by global electrification trends.

In a more optimistic take, Teck Resources (TECK) is "now facing the most favorable outlook it's had for a very long time," Michael Wiggins de Oliveira writes in a bullish analysis posted on Seeking Alpha.

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