SunCoke Energy Inc. (SXC) announced preliminary estimates for its domestic coke production and capacity utilization for the fourth quarter of 2014. In addition, the company provided its full-year 2014 guidance.
SunCoke Energy expects domestic coke production to be 1,083 thousand tons, up around 2.6% from the prior-year figure. Higher production and improved coal-to-coke yields at the company’s Indiana Harbor facility will likely act as catalysts for the year-over-year improvement in domestic production. However, quarterly guidance is lower than the third-quarter 2014 figure by roughly 0.6%.
SunCoke Energy’s domestic capacity utilization in the fourth quarter of 2014 is expected to be 101%, up 200 basis points from the prior-year level and down 100 basis points sequentially. This is likely to happen due to the aforementioned reasons.
For full-year 2014, domestic coke production is expected to be 4,175 thousand tons, in line with the projection reported during the company’s third-quarter 2014 earnings call. However, the guidance is around 2.2% lower than 4,269 thousand tons produced a year ago, due to the combined effect of several factors – challenges of the restoration and production activities at the Indiana Harbor facility, lower coal-to-coke yields at the Haverhill facility and harsh winter in the first quarter of 2014.
Domestic capacity utilization for full-year 2014 is pegged at 98%, compared with 101% a year ago.
SunCoke Energy is currently downsizing its coal mining business through initiatives like divesting, idling and shutting down mines in order to counter prevailing weakness in the coal market. In Dec 2014, the company announced that its wholly owned subsidiary, Jewell Resources, Inc., has inked a definitive agreement to sell 100% of its interest in the Harold Keene coal companies to Omega Holdings, LLC for around $9.5 million.
However, 2015 looks bright for the coal industry. As per the World Steel Association’s report published in Oct 2014, steel consumption in 2015 will increase 2% over the 2014-level. This will likely boost demand for coke as it is the primary raw material for steel production.
A stable domestic coke output will allow SunCoke Energy to meet higher coke demand in the future and compete with peers like Alliance Resource Partners LP (ARLP) and Rhino Resource Partners LP (RNO).
SunCoke Energy currently has a Zacks Rank #3 (Hold). A better-ranked stock in the sector include Hallador Energy Company (HNRG), carrying a Zacks Rank #1 (Strong Buy).
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