SunCoke Energy Inc.
) announced its outlook on domestic coke production and domestic
capacity utilization for third quarter of 2013.
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Per the announcement, the domestic coke production in the quarter
is expected to be flat with the prior-quarter level and down
marginally by 1.5% year over year to 1,081 thousand tons. The
year-over-year decline in production guidance is due to lower
production at SunCoke Energy's Indiana Harbor cokemaking facility
for the restoration activities.
SunCoke Energy's domestic capacity utilization, in the third
quarter of 2013, is expected to be flat sequentially and two
percentage points lower than the year-ago figure of 103% to 101%.
This is likely to happen for the aforesaid reason.
We note that the Indiana Harbor facility, which is currently
undergoing major upgrades, also witnessed lower production in the
last two quarters.
Despite the refurbishment at the Indiana Harbor cokemaking
facility, SunCoke Energy recently inked a deal with
) to supply 1.22 million tons of metallurgical (met) coke
annually from the facility. SunCoke Energy and ArcelorMittal have
a strong business alliance. The renewed contract will enable the
company to secure a stable revenue stream, going forward.
We know that met coke or hard coal is the primary raw material,
utilized for the production of steel due to its heat producing
feature. Global steel production is expected to increase in 2013
and 2014, primarily driven by higher consumption from China and
India. In addition, we believe that the upcoming football world
cup in 2014 and 2016 Olympic Games will boost demand for steel.
On the electricity generation front, the Energy Information
Administration (EIA) announced that total coal consumption will
increase in the near term primarily due to strong demand for
electricity generation and volatility in natural gas prices.
To manage higher coal demand in the future, SunCoke Energy
acquired Lakeshore Coal Handling Corporation, a coal handling and
blending company, in Aug 2013. Further, the company's unit
SunCoke Energy Partners, L.P.
) plans to acquire 100% ownership interest in Kanawha River
In spite of providing lower guidance for domestic coke
production, SunCoke Energy's share price touched a new 52-week
high of $17.63 on Oct 4, 2013, primarily backed by strategic
acquisitions and stable future contracts pipeline.
SunCoke Energy currently has a Zacks Rank #2 (Buy).
James River Coal Co.
) is another stock in the industry that is worth considering with
a Zacks Rank #2 (Buy).