OUR BUSINESS
Long-Term Coke Contracts
SunCoke Energy, Inc. (NYSE: SXC) and SunCoke Energy Partners, L.P. (NYSE: SXCP) have long-term, take-or-pay cokemaking contracts with all of the integrated steel producers in the U.S.: ArcelorMittal USA, AK Steel Holding Corp. and United States Steel Corp.
Key Contract Terms
- Contract duration typically 15 to 20 years; current contracts have remaining terms of approximately 6 to 17 years
- Customers required to take all the coke we produce up to contract maximum or pay for what is not taken
- Coke production in excess of contract maximum can be sold to a third-party if customer chooses not to take
- SunCoke required to meet certain operating and coke volume minimums
- Commodity risk minimized by passing through coal, transportation and certain operating costs to customer
- No early termination without default, except one contract under limited circumstances(1)
- Default triggers significant penalties that are materially equivalent to accelerating the remaining economic terms of the contract
- Termination under Force Majeure available only for “acts of God,” such as floods or other natural disasters, and extreme circumstances (strikes, lockouts, embargoes, boycotts, etc.)
- Counterparty risk mitigated by contracting with customers’ respective parent companies
- AK Steel and U.S. Steel contracted with, or guaranteed by, their respective parent companies
- ArcelorMittal USA guarantees the contracts for Indiana Harbor and Haverhill 1
Overview of SunCoke's U.S. Coke Contracts
| Granite City | Haverhill 1 | Haverhill 2 | Indiana Harbor | Jewell | Middletown | |
|---|---|---|---|---|---|---|
| Counterparty / Guarantor | United States Steel Corp. | ArcelorMittal USA | AK Steel Holding Corp. | ArcelorMittal USA | ArcelorMittal USA | AK Steel Holding Corp. |
| Location | Granite City, IL | Franklin Furnace, OH | Franklin Furnace, OH | East Chicago, IN | Vansant, VA | Middletown, OH |
| SXCP / SXC Ownership | 75% / 25% | 98% / 2% | 98% / 2% | 0 / 100% | 0 / 100% | 98% / 2% |
| Start-up Year | 2009 | 2005 | 2008 | 1998 | 1962 | 2011 |
| Contract Expiration | 2025 | 2020 | 2022[1] | 2023 | 2020 | 2032 |
| Cokemaking Ovens | 120 | 100 | 100 | 268 | 142 | 100 |
| Nameplate Capacity (short tons per year) | 650,000 | 550,000 | 550,000 | 1,220,000 | 720,000 | 550,000 |
| SunCoke Minimum Volume Obligation[4] | 90% | 98% | 90% | 100% | 99% | 95% |
| Maximum Volume Customer Required to Take[4] | 105% | 102% | 105% | 100% | 101% | All plant production[2] |
| Coal Costs | All costs, including transportation, are passed to customer | All costs, including transportation, are passed to customer | All costs, including transportation, are passed to customer | All costs, including transportation, are passed to customer | All costs, including transportation, are passed to customer | All costs, including transportation, are passed to customer |
| Operating Costs[3] | Passed to customer; sharing of over/ underruns, cap adjusted annually by inflation index | Fixed cost adjusted annually by inflation index | Passed to customer; sharing of over/ underruns | Fixed cost adjusted annually by inflation index through 2017; negotiated annually thereafter | Fixed cost adjusted annually by inflation index | Passed to customer; sharing of over/ underruns |
| Reimbursement of Gov't Mandated Expenditures | Yes | Yes | Yes | Yes | Environmental taxes passed to customer | Yes |
[1] AK Steel can terminate Haverhill contract with two-year notice, permanent closure of blast furnace steelmaking facilities and a termination fee if prior to 2018
[2] AK Steel takes blast furnace coke and small nut or breeze coke at Middletown. Total Middletown capacity on a “run of oven” basis is approximately 578,000 tons per year
[3] At Haverhill and Jewell, SunCoke delivers coke to customers and is reimbursed in full for coke transportation costs
[4] As percent of facility’s nameplate capacity; subject to coal blend
SXCP Contract Protections
- In addition to the take-or-pay contract structure, SunCoke Energy, Inc. provides SunCoke Energy Partners, L.P. certain commercial protections through 2018 under its Omnibus Agreement
- SXC will make SXCP whole by stepping in to pay SXCP for the coke produced under the same contract terms in the event of a failure by the customer to fulfill its purchase or payment obligations (other than as a result of Force Majeure)
Links to Contracts Filed with the SEC
Our cokemaking contracts were filed with the SEC as part of our initial public offering in 2011, with any amendments included in subsequent 10-K and 10-Q filings. Some contract terms have been redacted to protect confidentiality. If you would like to access the redacted contracts, please visit www.sec.gov or contact us at investorrelations@suncoke.com to receive a link.