Suncoke Energy Inc 's Comment on Competition and Industry Peers
Cokemaking
The cokemaking business is highly competitive. Most of the world’s coke
production capacity is owned by blast furnace steel companies utilizing by-product
coke oven technology. The international merchant coke market is largely supplied
by Chinese, Colombian and Ukrainian producers, among others, though it is difficult
to maintain high quality coke in the export market, and when coupled with transportation
costs, coke imports into the U.S. are often not economical.
The principal competitive factors affecting our cokemaking business include
coke quality and price, reliability of supply, proximity to market, access to
metallurgical coals and environmental performance. Our oven design and heat
recovery technology plays a role in all of these factors. Competitors include
merchant coke producers as well as the cokemaking facilities owned and operated
by blast furnace steel companies.
In the past, there have been technologies which have sought to produce carbonaceous
substitutes for coke in the blast furnace. While none have proven commercially
viable thus far, we monitor the development of competing technologies carefully.
We also monitor ferrous technologies, such as direct reduced iron production
("DRI"), as these could indirectly impact our blast furnace customers.
We believe we are well-positioned to compete with other coke producers. Current
production from our cokemaking business is largely committed under long-term
take-or-pay contracts. As a result, competition mainly affects our ability to
obtain new contracts supporting development of additional cokemaking capacity,
re-contracting existing facilities, as well as the sale of coke in the spot
market. Our facilities were constructed using proven, industry-leading technology
with many proprietary features allowing us to produce consistently higher quality
coke than our competitors produce. Additionally, our technology allows us to
produce heat that can be converted into steam or electrical power.
Coal Logistics
The coal mixing and/or handling service market is highly competitive in the
geographic area of our operations. The principal competitive factors affecting
our coal logistics business include proximity to the source of coal as well
as the nature and price of our services provided. We believe we are well-positioned
to compete with other coal mixing and/or handling terminal service providers.
Our KRT competitors are generally located within 100 miles of our operations.
KRT has state-of-the-art mixing capabilities with fully automated and computer-controlled
mixing that mixes coal to within two percent accuracy of customer specifications.
KRT also has the ability to provide pad storage and has access to both CSX and
Norfolk Southern rail lines as well as the Ohio River system.
The principal competitors of CMT, who serve the coal export market, are located
on the U.S. Gulf Coast or U.S. East Coast. CMT is one of the largest export
terminals on the U.S. Gulf Coast and provides strategic access to seaborne markets
for coal and other industrial materials.
Region which should allow our customers to benefit from lower shipping costs.
Additionally, CMT is the only terminal in the lower U.S. with direct rail access
on the Canadian National Railway, which provides a competitive advantage.
Lake Terminal and DRT provide coal handling and/or mixing services to our Indiana
Harbor and Jewell cokemaking facilities, respectively, and therefore, do not
have any competitors.
