SunCoke in Indian Joint Venture - Analyst BlogWednesday, November 21, 2012
Metallurgical coke producer SunCoke Energy, Inc. (SXC) ventured into the Asian market by entering into a joint venture with Indian steel maker VISA STEEL. SunCoke has been looking to expand its operation in the global coke markets and this Indian joint venture fits the bill perfectly. If everything is in order, the deal is expected to close in the first quarter of 2013.
Per the agreement, the company will invest $64 million (Rs. 368 crores) and have 49% interest in the venture with VISA STEEL retaining the remaining 51%. The joint venture will comprise VISA Steel’s existing 400,000 metric ton (“MT”) per annum heat recovery coke plant and associated steam generation units at Kalinganagar in Odisha, India.
The Indian steel industry has grown rapidly and is presently the fourth largest steel producer in the world. With per capita annual steel consumption of 121.3 pounds (55 kgs) compared to the world average of 454.1 pounds (206 kg), the Indian steel market has ample room for growth in the forthcoming years.
Coke is an integral part in the production of steel and demand for steel is on the rise in the Indian market due to rapid infrastructural development. Hence, we believe the SunCoke joint venture in the Indian subcontinent will not only be opportunistic but also reap the desired returns for the company. We also believe a stable political environment in India along with a strengthening dollar will add to the benefits of the deal.
SunCoke presently has a coke making facility in Vitoria, Brazil, which it operates for a Brazilian affiliate of ArcelorMittal (MT). We believe the decision to expand in other international markets with solid growth potential bodes well for the future prospects of the company. The company also has plans to open coke plants in China.
Headquartered in Lisle, Illinois, SunCoke Energy is a producer and supplier of coke needed for the steel making process. The company has 1,160 full time employees and a market cap of $1.09 billion. SunCoke currently retains a short-term Zacks #3 Rank, (Hold rating).
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