Metallurgical coal producer SunCoke Energy Inc. SXC announced domestic coke production for the fourth quarter and the full year of 1.03 million tons (Mt) and 4.12 Mt, respectively, witnessing a decline of 53,000 tons and 52,000 tons year over year. However, 2015 volumes were consistent with the production guidance of 4.1–4.2 Mt.
The company’s drop in production is attributed to below-target output at its Indiana Harbor coke-making unit and its Granite City unit reaching maximum contract volumes.
The company’s partnership, SunCoke Energy Partners, L.P. SXCP, also reported fourth-quarter and 2015 coke production of a respective 595,000 tons and 2.42 Mt, declining from 628,000 tons and 2.44 Mt in the prior-year period.
Metallurgical coal is primarily used in the manufacture of steel. Per the World Steel Association, global steel demand is expected to decline 1.7% to 1,513 Mt from 2014 levels.
Economic slowdown in China has dealt a massive blow to the global steel industry. China's steel industry is still reeling under overcapacity with barely any sign of recovery.
This year, too, the metallurgical coal industry is negatively positioned with little chance of recovery, as it grapples with global steel oversupply. The demand supply imbalance has resulted in slowing steel production rates and consequently declining met coal demand.
Zacks Rank
SunCoke Energy carries a Zacks Rank #3 (Hold). A couple of better-ranked coal stocks are Cloud Peak Energy Inc. CLD and Glencore Plc GLNCY, both carrying a Zacks Rank #2 (Buy).
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