SunCoke optimistic about impact of steel plant idling on coke supply contract

SunCoke Energy (NYSE: SXC) said March 25 that United States Steel’s announcement that it is temporarily idling its Granite City Works flat-rolled operations in Illinois won’t impact its longstanding deal to sell coal-derived coke to the facility.

Said the company: “SunCoke Energy supplies coke to U.S. Steel’s Granite City Works under a long-term, take-or-pay contract until 2025 and the temporary idling doesn’t change any obligations for U.S. Steel under this contract. We value our long-standing relationship with U.S. Steel and will assist them in managing through the situation, which may include shipping coke to other U.S. Steel facilities.”

In addition, SunCoke Energy Partners LP (NYSE: SXCP), which has a 75% interest in the Granite City cokemaking operations, is supported by an omnibus agreement with SunCoke Energy that provides certain commercial protections.

United States Steel Corp. (NYSE: X) announced March 25 it will consolidate its North American Flat-Rolled operations and temporarily idle its Granite City Works operations in Granite City, Ill. As the primary flat-roll supplier of Lone Star Tubular Operations, the consolidation is part of an on-going adjustment of steelmaking operations throughoutNorth America to match customer demands. The company said the consolidation is a result of “challenging market conditions” that reflect the cyclical nature of the industry. Global influences in the market like reduced steel prices, unfair trade, imports and fluctuating oil prices, continue to have an impact on the business. The company will continue to operate its steelmaking operations in Alabama, Indiana, Michigan and Pennsylvania. 

As part of the consolidation, 2,080 employees at Granite City Works are being issued notices under the Worker Adjustment and Retraining Notification (WARN) Act. These notices are separate from the notices related to the permanent shutdown of Granite City Works’ cokemaking facility, the steel company noted.

SunCoke’s Granite City facility, with 120 coke ovens and a production capacity of 650,000 tons per year, also produces power from waste heat.

U.S. Steel’s separate coke facilities at Granite City have two coke batteries with an approximate annual production capability of 500,000 tons. Located in the St. Louis area in Southern Illinois area, Granite City Works is a supplier of high-quality hot-rolled, cold-rolled and coated sheet steel products to customers in the construction, container, piping and tubing, service center, and automotive industries. Granite City Works has an annual raw steelmaking capability of 2.8 million net tons.

SunCoke Energy supplies high-quality coke to the integrated steel industry under long-term take-or-pay coke contracts that pass through commodity and certain operating costs to customers. It is the sponsor of SunCoke Energy Partners, a publicly traded master limited partnership, holding a 2% general partner interest, 56% limited partnership interest and all of the incentive distribution rights. Its cokemaking facilities are located in Illinois, Indiana, Ohio, Virginia, Brazil and India.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.