Coal mining segment
SunCoke Energy’s (SXC) coal mining segment produces metallurgical coal. In 2013, SunCoke Energy’s met coal segment produced 1.1 million tons of met coal. Most of the produced met coal is used internally. Major met coal producers (KOL) in the United States include Alpha Natural Resources (ANR) and Walter Energy (WLT). Peabody Energy (BTU) produces met coal in its Australian mines. Met coal is an important raw material in the steelmaking process as it’s used to make coke.
SunCoke Energy has recently announced production cuts in its coal mining segment and expects to produce 500,000 annual tons in the short term. The company has recently classified this segment as a nonoperating segment and plans to sell it off soon.
As discussed earlier, coke is used in the iron making process, which in turn is used in the steelmaking process. SunCoke Energy produced 4.2 million tons of coke in 2013. A large part of the output from the coal mining segment is utilized internally at the company’s Jewell coke making plant. Moreover, the company procures met coal from other Appalachian coal producers. Around 1.5 million tons of met coal are needed to produce 1 ton of coke. Thus, the current annual met coal requirement for the company stands at roughly 6.5 million tons. In 2013, internal procurement from the mining segment was 1.1 million tons, or around 17% of the total requirements.
Directly reduced iron (or DRI)
SunCoke Energy seeks to leverage on its market position in the coke segment of steelmaking for entry into the iron segment. In 2013, the company received a favorable letter from authorities for entry into directly reduced iron (or DRI) (also known as sponge iron) production. In an alternative steelmaking method, DRI replaces iron ore and steel scrap as a raw material in electric arc furnace, as discussed in the previous part of this series. The alternative method overcomes some of the obstacles associated with the conventional steelmaking process using blast furnace.
While SunCoke Energy is looking for opportunities in the segment, the company doesn’t have any presence in the iron segment of the steelmaking process. If the company starts operating in the iron segment as well, it will have a presence in carbon and iron, both legs of the steel raw material supply chain.
In the next part, we’ll have a look at SunCoke Energy’s international operations.