SunCoke Ends 2012 on a Strong Note

Pure coal play SunCoke Energy Inc. ( SXC - Snapshot Report ) announced its production estimates for the fourth quarter and full year 2012. The favorable production can be attributed to the company’s Middletown facility in Ohio, which contributed 153 thousand tons and 602 thousand tons of output during the fourth quarter and 2012, respectively.

The Middletown facility performed significantly well registering healthy output growth compared with its fourth quarter and 2011 output, which stood at 68 thousand tons. The company clocked aggregate coke making capacity utilization of 101% and 102% in the fourth quarter and 2012, respectively.

SunCoke provides an optimistic projection with output expected to increase 6.6% in the fourth quarter compared with the year-ago quarter level. Similarly, 2012 production level is anticipated to rise 15.4% compared with the 2011 figure.

In terms of volume, SunCoke upped its output estimates to 1.08 million tons for the fourth quarter. For full-year 2012, production quantity is also expected to tread on the same path and will surge to 4.3 million tons.

Even though the production from the high-return Jewell Coke was low at 171 thousand tons in the fourth quarter 2012 compared with 177 thousand tons achieved in the year-ago quarter, domestic coke units delivered the major thrust by generating 911 thousand tons, up from 838 thousand tons produced in the year ago period.

Likewise, in 2012, Jewell Coke will produce 698 thousand tons compared to 707 thousand tons generated in 2011. However increased production of 3,644 thousand tons in the domestic coke mines compared to3,055 thousand tons in 2011, will more than offset the output deceleration in Jewell Coke.

Despite ending 2012 with a higher production level, the company will have to face hardships in 2013 due to increasing competition from natural gas in domestic markets and softening demand in overseas market. This is evident from the company’s recent disclosure that its coke making fleet will do moderate business owing to the continued weak coal price fundamentals.

Reflecting these broad negative near-term triggers, the Zacks Consensus estimates for the first quarter is expected to decline by 16.67% year over year to 20 cents. SunCokecurrently retain a short-term Zacks Rank #5 (Strong Sell).

Another operator in the coal domain, Alpha Natural Resources Inc. ( ANR - Snapshot Report ) has also trimmed its metallurgical coal generation expectation by 3 to 4 million tons annually in response to the tepid market conditions in the U.S.

With a market capitalization of $1.17 billion, SunCoke Energy Inc. engages in mining and producing coal in the Americas. It offers metallurgical and thermal coal used in steelmaking facilities.