SunCoke Energy Stock

SunCoke Energy, Inc. (SunCoke Energy) is the largest independent producer of high-quality coke in the Americas.

The company's coke is primarily used as a principal raw material in the blast furnace steelmaking process, as well as in the foundry production of casted iron, and the majority of its sales are derived from blast furnace coke sales made under long-term, take-or-pay agreements. The company also sells coke produced utilizing capacity in excess of that reserved for its long-term, take-or-pay agreements to customers in both the export and North American domestic coke markets seeking high-quality product for their blast furnaces. The company has designed, developed and built, and it owns and operates five cokemaking facilities in the United States (U.S.) with collective nameplate capacity to produce approximately 4.2 million tons of blast furnace coke per year. Additionally, the company designed and operates one cokemaking facility in Brazil under licensing and operating agreements on behalf of ArcelorMittal Brasil S.A. (ArcelorMittal Brazil), which has approximately 1.7 million tons of annual cokemaking capacity.

The company also owns and operates a logistics business that provides export and domestic material handling and/or mixing services to steel, coke (including some of its domestic cokemaking facilities), electric utility, coal producing and other manufacturing based customers. The company's logistics terminals, which are strategically located to reach Gulf Coast, East Coast, Great Lakes and international ports, have the collective capacity to mix and/or transload more than 40 million tons of product annually and have storage capacity of approximately 3 million tons.

Segments

The company operates through three segments: Domestic Coke, Brazil Coke and Logistics.

Domestic Coke

Domestic Coke segment consists of cokemaking facilities and heat recovery operations at the company's Jewell, Indiana Harbor, Haverhill, Granite City and Middletown plants. The company's core business model is predicated on providing steelmakers an alternative to investing capital in their own captive coke production facilities and to serve as the long-term supplier of high quality coke by investing in its facilities with leading technology, as well as safety and environmental performance. The company's cokemaking ovens utilize efficient, modern heat recovery technology designed to combust the coal's volatile components during the cokemaking process and use the hot flue gas to generate steam and electricity for sale through steam generation facilities or cogeneration plants, respectively. This differs from by-product cokemaking, which repurposes the coal's volatile components for other uses. Steam generated is generally sold to customers pursuant to steam supply and purchase agreements, and electricity generated is generally sold into the regional power market or to customers pursuant to energy sales agreements.

The company's advanced heat recovery cokemaking process has numerous advantages over by-product cokemaking, including producing higher quality coke, using waste heat to generate derivative energy for resale, and reducing the environmental footprint. The Clean Air Act Amendments of 1990 specifically directed the U.S. Environmental Protection Agency (EPA) to evaluate its heat recovery coke oven technology as a basis for establishing Maximum Achievable Control Technology (MACT) standards for new cokemaking facilities. In addition, each of the four cokemaking facilities that it has built since 1990 has either met or exceeded the applicable Best Available Control Technology (BACT), or Lowest Achievable Emission Rate (LAER) standards, as applicable, set forth by the EPA for cokemaking facilities at that time. The company has constructed the only greenfield cokemaking facilities in the U.S. in over 30 years and are the only North American coke producer that utilizes heat recovery technology in the cokemaking process.

Blast Furnace Coke

Blast Furnace Coke sales are primarily made pursuant to long-term, take-or-pay agreements with the customers. These agreements require the company to produce the contracted volumes of coke and require its customers to purchase such volumes of coke up to a specified tonnage or pay the contract price for any tonnage they elect not to take. As a result, the company's ability to produce the contracted coke volume is a key determinant of its profitability. The company's domestic capacity is largely consumed by these long-term agreements, which do not have exposure to the fluctuations in domestic spot prices for blast furnace coke.

The company's long-term, take-or-pay coke sales agreements contain pass-through provisions for costs it incurs in the cokemaking process, including coal and coal procurement costs, subject to meeting contractual coal-to-coke yields, operating and maintenance expenses, costs related to the transportation of coke to its customers, taxes (other than income taxes) and costs associated with changes in regulation.

The company also sells non-contracted blast furnace coke tons into the North American spot coke and export coke markets, utilizing capacity in excess of that reserved for its long-term, take-or-pay agreements.

Foundry Coke

While the revenues in the company's Domestic Coke segment are primarily tied to blast furnace coke sales made under long-term, take-or-pay agreements, it also produces and sells foundry coke out of its Jewell cokemaking facility. Foundry coke is a high-quality type of coke that is used at foundries to melt iron and various metals in cupola furnaces, which is further processed via casting or molding into products used in various industries such as construction, transportation and industrial products. Foundry coke sales are generally made under annual agreements with the company's customers for an agreed upon price.

Brazil

The company's Brazil segment consists of its cokemaking operations located in Vitória, Brazil, where it operates the ArcelorMittal Brazil cokemaking facility for a Brazilian subsidiary of ArcelorMittal S.A. Revenues from the Brazilian cokemaking facility are derived from licensing and operating fees, which are based upon the level of production required by the company's customer and full pass-through of the operating costs of the facility.

Logistics

Logistics segment consists of Convent Marine Terminal (CMT), Kanawha River Terminal (KRT) and SunCoke Lake Terminal (Lake Terminal). The company's terminals act as intermediaries between its customers and end users by providing transloading and mixing services. Materials are transported in numerous ways, including rail, truck, barge or ship. The company provides handling and/or mixing services to its customers on a per ton basis. CMT is located in Convent, Louisiana, with strategic access to seaborne markets for coal and other industrial materials. The terminal provides loading and unloading services and has direct rail access and the current capability to transload 15 million tons annually with its top of the line ship loader. The facility serves coal mining customers as well as other merchant business, including aggregates (crushed stone), petroleum coke and iron ore. CMT's efficient barge unloading capabilities complement its rail and truck offerings and provide the terminal with the ability to transload and mix a significantly broader variety of materials, including coal, petroleum coke and other materials from barges at its dock. KRT is a leading metallurgical and thermal coal mixing and handling terminal service provider with collective capacity to mix and transload 25 million tons annually through its operations in Ceredo and Belle, West Virginia. Lake Terminal provides coal handling and mixing services to SunCoke's Indiana Harbor cokemaking operations. The company's KRT terminals serve two primary domestic markets, metallurgical coal trade and thermal coal trade. Lake Terminal provides coal handling and/or mixing services to the company's Indiana Harbor cokemaking facility.

Seasonality

The company's revenues in its Domestic Coke segment are largely tied to long-term, take-or-pay agreements and as such, are not seasonal. However, the company's cokemaking profitability is tied to coal-to-coke yields, which improve in drier weather. Accordingly, the coal-to-coke yield component of the company's profitability tends to be more favorable in the third quarter (year ended December 31, 2023). KRT service demand fluctuates due to changes in the domestic electricity markets. Operating costs at CMT are impacted by water levels on the Mississippi River, which are often higher in the spring months.

Transportation and Freight

For inbound transportation of metallurgical coal purchases, the company's facilities that access a single rail provider have long-term transportation agreements, and where necessary, coal-mixing agreements that run concurrently with the associated long-term, take-or-pay coke sales agreements for the facility. At facilities with multiple transportation options, including rail and barge, the company enters into short-term transportation contracts from year to year. Delivery costs, and annual volume commitments included in certain agreements, are generally passed through to the customers.

For coke sales, the point of delivery varies by agreement and facility. The destination for coke sales under long-term, take-or-pay agreements from the company's Jewell and Haverhill cokemaking facilities is generally designated by the customer and shipments are made by railcar under long-term transportation agreements, which may include annual volume commitments, and are generally passed through to its customers. The destination for non-contracted blast coke sales is also generally designated by the customer and shipments are made by either railcar, truck, barge or ship. Transportation and freight costs associated with these sales do not contain the same pass through provisions as the company's long-term, take-or-pay agreements. At its Middletown, Indiana Harbor and Granite City cokemaking facilities, coke is delivered primarily by a conveyor belt leading to the customer's blast furnace, with the customer responsible for additional transportation costs, if any. Most transportation and freight costs in the company's Logistics segment are paid by the customer directly to the transportation provider.

Legal and Regulatory Requirements

The company's cokemaking facilities employ Maximum Achievable Control Technology (MACT) standards designed to limit emissions of certain hazardous air pollutants.

The Clean Air Act and similar state laws and regulations affect the company's cokemaking operations, primarily through permitting and/or emissions control requirements relating to criteria pollutants and MACT standards. The company is subject to two categories of MACT standards.

The company's terminal operations located along waterways and the Gulf of Mexico are also governed by permitting requirements under the CWA (as defined below) and the CAA. These terminals are subject to U.S. Coast Guard regulations and comparable state statutes regarding design, installation, construction, management and security.

The Federal Energy Regulatory Commission (FERC) regulates the sale of electricity from the company's Haverhill and Middletown facilities, including the implementation of the Federal Power Act (FPA) and the Public Utility Regulatory Policies Act of 1978 (PURPA). The nature of the operations of the Haverhill and Middletown facilities makes each facility a qualifying facility under PURPA, which exempts the facilities and the company from certain regulatory burdens, including the Public Utility Holding Company Act of 2005 (PUHCA), limited provisions of the FPA, and certain state laws and regulation.

The Clean Water Act of 1972 (CWA) may affect the company's operations by requiring water quality standards generally and through the National Pollutant Discharge Elimination System (NPDES) program. Regular monitoring, reporting requirements and performance standards are requirements of NPDES permits that govern the discharge of pollutants into water.

Certain of the company's wastes are also subject to Department of Transportation regulations for the shipping of materials. The company also must comply with reporting requirements under the Emergency Planning and Community Right-to-Know Act and the Toxic Substances Control Act.

The company's facilities are subject to regulation by OSHA or MSHA under the Occupational Safety and Health ACT and other agencies with standards designed to ensure worker safety. CMT is subject to regulation by the U.S. Coast Guard pursuant to the Maritime Transportation Security Act.

History

SunCoke Energy, Inc. was founded in 1960. The company was incorporated in Delaware in 2010.