NEW YORK International coke producer SunCoke Energy Inc. plans to increase its share of the U.S. and Canadian coke market, chairman and chief executive officer Frederick "Fritz" Henderson said in a recent interview with AMM sister publication Steel First.
"We see significant opportunity to grow our share of the U.S. and Canadian coke market, both organically through permitting and development of a new greenfield facility and through the potential acquisition of existing coke batteries," Henderson said.
"In our review of the roughly 20 million tons of coke-making capacity in the United States and Canada, weve identified roughly 4 million tons of capacity that we think could potentially be acquired," he said. "(This is) capacity that meets our criteria relative to the competitiveness of the customer purchasing the coke, the blast furnace being supplied and the overall condition of the coke-making asset."
Henderson said that many of the assets are integrated into customers facilities. "While we have talked with the owners of these facilities, it would be premature to discuss or comment on any potential transaction until we have a definitive agreement in place," he said.
The Lisle, Ill.-based company produces and sells nearly 6 million tons of coke globally. In the United States and Brazil, its coke is sold in the markets where it is produced.
SunCoke recently expanded its international presence to India with a 400,000-tonne-per-year coke plant as part of a joint venture with Kolkata, India-based steel producer Visa Steel Ltd., and plans to focus on growth in this key market (amm.com, March 18).
Demand for metallurgical coal has softened due to a global downturn in steel demand and consumption. Global spot prices for metallurgical coal are about $135 per ton, down around 14 to 15 percent from a year ago.
"Met coal prices appear to be bouncing along the bottom and near to the marginal cost of production for many players. We expect this will continue and dont see any material price recovery in the near term," Henderson said. "As a result, we have seen a number of miners take capacity offline. Weak global demand trumps recovery in the United States when it comes to commoditiesor, more specifically, met coal. In our view, any price recovery would need to come from the demand sideChina and Europe in particular."
In February, SunCoke idled its Dominion Mine 36, which is part of the companys Jewell mining operations in Virginia, due to the significant downturn in the coal market (amm.com, Feb. 12).
"Over the past few quarters, we have rationalized capacity by closing four mines (two company-owned and two contract-operated). We do not have plans at this point to close or idle any more mines," Henderson said.
"Though we face lower coal pricing, down by a steep $50 per ton year on year, weve partially offset this through a reduction in our cash production costs by $23 per ton during the first quarter of 2013," he said. "Weve taken aggressive action by consolidating mines and resources, and investing in training and equipment upgrades, all with the goal of being more efficient, productive and safe."
Henderson said that SunCokes coal mining sales and production volumes are essentially level with a year ago, but "we are accomplishing this with four fewer mines, a leaner headcount and at lower cost."
SunCoke would like to increase its presence in the steel value chain by pursuing opportunities in areas such as coal handling and processing or iron ore processing. "We believe coal handling and processing creates another interesting opportunity for us. Certainly, it would be a very selective acquisition of assets, primarily those focused on met coal handling," Henderson said.
"We estimate SunCoke is the second-largest purchaser of met coal in the United States, so this is a business we know reasonably well. The acquisition of these types of assets could be a nice complement to our existing coke-making operations," he said. "Regarding iron ore processing, we are researching opportunities that support the ferrous side of the steel value chain, such as concentrating, pelletizing, transporting and handling."
A version of this article was first published by AMM sister publication Steel First.