SunCoke Upbeat on Met Coal, Ups Capex

Researched by Industrial Info Resources (Sugar Land, Texas)--Metallurgical coking coal producer SunCoke Energy Incorporated (NYSE:SXC) (Lisle, Illinois) has a somewhat brighter outlook following a long period of rough market conditions, as it looks forward to a year of stronger spending and potentially robust support from the Trump administration for domestic steel production, for which metallurgical coal is the major component. Industrial Info is tracking more than $900 million in active projects involving SunCoke.

SunCoke's capital expenditures for full-year 2017 are projected to be roughly $80 million, compared with $63.7 million in 2016; its domestic coke production is expected total about 3.9 million tons, mostly unchanged from 2016.

Revenues for first-quarter 2017 stood at $309.7 million, about $1.4 million lower than those from the same period last year. The decline was attributed, in part, to a 54,000-ton drop in sales, primarily due to lower production at the company's Indiana Harbor facility amid oven rebuilds. Industrial Info is tracking $26 million in oven rebuilds at its Indiana Harbor Coke Plant in East Chicago, Indiana. The company hopes to repair or rebuild 53 of the 268 coke ovens at the 1.2 million-ton-per-year facility to stabilize production and boost efficiency. Flour Corporation (NYSE:FLR) (Irving, Texas) is among the contractors. For more information, see Industrial Info's project report.

"As anticipated, we continue to experience this degradation of the non-rebuilt ovens, which also impacted volumes in the quarter versus the prior year," said Fay West, the senior vice president and chief financial officer of SunCoke, in a quarterly earnings call. "Excluding Indiana Harbor, the remainder of the Coke business and balance performed as expected, with various pluses and minuses across the fleet."

Rough market conditions for coal companies had severely stalled progress for one of the company's highest-valued ventures: a $400 million metallurgical coke-manufacturing plant in South Shore, Kentucky, and an adjoining $450 million cogeneration plant. The latter currently is designed to generate 90 megawatts (MW) via waste heat from the 600,000-ton-per-year manufacturing plant, and would include a 138-kilovolt (kV) transmission line to AEP Energy Incorporated's (Chicago, Illinois) substation in Millbrook Park, Ohio. For more information, see Industrial Info's project reports on the manufacturing plant and the cogeneration plant.

SunCoke's outlook brightened on Thursday when President Donald Trump promised to investigate whether imports of foreign-made steel pose a threat to U.S. national security. Although Trump did not single out China as a culprit, his move was cheered by several leading companies that had complained about China unfairly dumping steel onto U.S. markets and rerouting steel to avoid tariffs. Among these were United States Steel Corporation (NYSE:X) (Pittsburgh, Pennsylvania) and AK Steel Holding Corporation (NYSE:AKS) (West Chester, Ohio), both of which saw their stock prices shoot up. For more information, see February 7, 2017, article - U.S. Steel, Nucor Sunny on 2017, Herald Trump's Stance on Infrastructure, Trade Laws.

Earlier in the week, Trump signed a "Buy American" order that reiterated his support for a "melted and poured" standard, which would require new pipeline and other projects to use domestically made steel. But many pipelines under construction--and many that already have purchased much of their steel, including Keystone XL--have leaned on cheaper, imported steel. Pipeline companies largely objected to the order, stressing that it would only increase construction costs.

The brighter horizon for steel-related coal companies is a stark contrast to those on the energy-related side, where vows from the Trump administration to revive U.S. coal-fired power generation are unlikely to put a dent in the domination of natural gas. For more information, see April 20, 2017, article - Trump, Utilities Disagree Over the Future of Coal-Fired Generation.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.