SunCoke posts solid earnings, extends coke supply deal with USS

A strong performance from its logistics segment drove SunCoke Energy’s results higher in the third quarter, according to the Lisle, Ill.-based company’s earnings report released on Thursday.

Alongside the earnings statement, the metallurgical coke producer also announced it has extended its Granite City coke supply agreement with U.S. Steel.

SunCoke said its coke supply agreement with the Pittsburgh-based steelmaker has been extended by six months to June 2025, with USS having the option to extend it by another six months.

Update on Granite City pig iron project

Recall that, in 2022, SunCoke and U.S. Steel signed a non-binding letter of intent to purchase the two blast furnaces at USS Granite City Works in Illinois, convert them to pig iron production, and then sell the pig iron to Big River Steel.

SunCoke calls this its ‘granulated pig iron (GPI) project.’ When the project was first announced, SunCoke said permitting and construction of the pig iron plant would take about two years.

On a conference call Thursday to discuss the quarterly results, SunCoke President and CEO Katherine Gates expressed some frustration with the GPI project delays.

She said the supply agreement extension allows SunCoke to continue supplying coke to U.S. Steel, albeit at reduced tonnages and lower economics, until the final GPI project agreement can be reached.

“We have to, unfortunately, wait due to the government’s inaction here,” she said. “It’s just really unfortunate that we’re stuck in the limbo of the government’s delay in not approving the sale of U.S. Steel to Nippon. … There’s consequences for all parties here.”

SunCoke still ‘strongly’ believes in the GPI project. Noting that its fundamentals are strong, Gates added, “We’re willing to accept it as we wait for the process to play out.”

Quarterly earnings and full-year guidance

Despite an unfavorable performance in its domestic coke segment, including lower coal prices and lower coke yields on long-term take-or-pay contracts, SunCoke reported strong Q3’24 earnings.

While its Q3’24 sales of $490.1 million showed a 6% year-on-year (y/y) decline, net income attributable to SunCoke jumped from $7.0 million to $30.7 million.

The income growth was primarily due to a one-time $9.5-million pre-tax gain from the elimination of SunCoke’s legacy federal black lung liability. This was due to a regulatory exemption received from the Department of Labor, SunCoke said.

SunCoke’s logistics segment saw an 18% y/y rise in inbound tons handled in Q3 to 5.843 million tons. The higher transloading volumes resulted in a 37% y/y jump in logistics revenues to $21.4 million.

The favorable logistics performance, along with the pre-tax gain from the Labor Department exemption, prompted SunCoke to increase its 2024 full-year guidance.

The company now expects 2024 net income to be between $85 million and $97 million, up from previous estimates of $67 million to $84 million. Adjusted EBITDA was previously expected to be on the high end of $240 million to $255 million, but SunCoke now forecasts it to be between $260 million and $270 million.

Domestic coke production is still anticipated to be 4.1 million short tons for the full year.