SunCoke Q1 earnings jump on cokemaking, logistics ops

SunCoke Energy Inc.’s earnings soared in the first quarter, with the company citing strong performances in its cokemaking and logistics segments.

“We are very pleased with the results from our cokemaking and logistics segments in the first quarter. Our domestic coke plants continued running at full capacity with strong operational performance,” Katherine Gates, president of SunCoke, said in a statement on Wednesday.

The Lisle, Ill.-based company logged net income attributable to SunCoke of $20 million, up 23% from $16.3 million a year earlier on sales that rose 0.1% to $488.4 million.

The metallurgical coke producer said the increase in net income was due to lower depreciation, amortization, and interest expenses.

The domestic coke segment’s Q1 sales volumes of 996,000 short tons (st) were up 5% from 950,000 st a year earlier.

“Our logistics segment delivered excellent results, handling 5.5 million tons during the quarter,” Gates added, noting that all spot blast and foundry coke sales have been finalized for the entire year.

SunCoke’s logistics segment consists of the handling and mixing services of coal and other aggregates at Convent Marine Terminal (CMT) in Convent, La.; Lake Terminal in East Chicago, Ind.; and Kanawha River Terminals on the Ohio River.

Granite City update

SunCoke and U.S. Steel signed a non-binding letter of intent on June 2022 for SunCoke to take over the steelmaker’s two Granite City blast furnaces in southern Illinois and convert them to pig iron production.

U.S. Steel indefinitely idled iron- and steelmaking at its Granite City Works in late November last year, including its ‘B’ blast furnace, one of two BFs at the 129-year-old mill. The ‘A’ furnace was indefinitely idled in April 2020, according to SMU’s blast furnace status table.

“We are continuing to work with U.S. Steel on the GPI project,” Gates said in an earnings call on Wednesday.

“We are doing the detailed engineering for what would be a first-of-its-kind project right now. And so we’ll continue to work with U.S. Steel on the GPI project, and we would look forward to working with Nippon in the future.”

Recall that Japan’s Nippon Steel is attempting to buy U.S. Steel in a deal valued over $14 billion, but it is facing regulatory hurdles.

When asked for further details, Gates said GPI is an “ongoing project with U.S. Steel, and I’m not going to comment further on it.”

However, she did say: “We continuously evaluate the capital needs of the business, our capital structure and the need to reward our shareholders and will make capital allocation decisions accordingly.”

Regarding cap-ex for the project,  Suncoke’s VP of Finance and Treasurer Shantanu Agrawal said the order of magnitude to think about is roughly “two years of our free cash flows plus some revolver borrowing.”

North American blast furnace coke market

Agrawal noted that a lot of EAF capacity is coming online in the next two to four years.

“But as we sit here today and you kind of think about versus the last two, three years — apart from the Granite City blast furnace shut down — the utilization or the coke demand hasn’t changed as a whole in the North America,” he said.

He estimated total coke production in the North American market to be around 8.5 million to 10 million st.

Outlook

For full-year 2024, the company said its total production of domestic coke is expected to be ~4.1 million st, while consolidated net income is expected to be between $67 million and $84 million.