SunCoke Energy Predicts Lower Q1 Output - Analyst Blog

SunCoke Energy, Inc.'s SXC preliminary coke production expectation for first quarter 2014 reflects a 10.2% decline from the comparable year-ago period. SunCoke Energy pegs first quarter domestic coke production at 944 thousand tons – the downtrend is primarily attributed to a severe winter and renovation work at its Indiana Harbor facility.

SunCoke expects first quarter production from its Indiana Harbor facility to decline by 64 thousand tons year over year while production from its Haverhill and Granite City operations is expected to collectively decline by 40 thousand tons. This will hit the company's domestic capacity utilization, which is estimated at 90% for the first quarter, down from 101% in the year-ago period.

2013 was on the whole a difficult year for the coal miners. The slackness in demand was felt across the board. SunCoke Energy's production in 2013 went down from 2012 levels. Preliminary estimates for the first quarter do not show any recovery in coal demand from the depressed levels.

However, we are not writing off the year for coal as global steel demand, per the World Steel Association, is expected to increase by 3.3% over last year. A guarded optimism was also noticed in SunCoke's initial 2014 coke production guidance issued during the fourth quarter 2013 earnings release. The company forecast 2014 coke production at 4.3 million tons, marginally higher than 4.27 million tons produced in 2013.

SunCoke operates in a very competitive industry. So, the expected recovery in coal demand due to a reviving steel industry does not necessarily translate into higher sales for SunCoke.  

SunCoke Energy currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Rhino Resource Partners LP RNO, Oxford Resource Partners, L.P. OXF and Westmoreland Coal Co. WLB. While Rhino Resource Partners and Oxford Resource Partners have a Zacks Rank #1 (Strong Buy), Westmoreland Coal carries a Zacks Rank #2 (Buy).