SunCoke Energy Inc. (SXC) and Indian steel major, VISA Steel Limited, officially declared the initiation of their cokemaking program in India. SunCoke teamed up with VISA Steel to form VISA SunCoke Limited, which has an asset basket comprising 400,000 metric tons of heat recovery coke facility and related steam generation units in Kalinganagar, Odisha, India.
SunCoke and VISA Steel will hold 49% and 51% of interest, respectively, in the collaborative venture. SunCoke invested around $67.0 million (Rs. 368 crore) in the project. The alliance between SunCoke and VISA Steel for the coke program was announced originally in Nov 2012.
Both the companies will run the partnership with equal representation on the board. The joint venture will allow the companies to pool in their expertise and resources. This will help serve the growing customer needs for superior quality coke in India. VISA SunCoke is expected to capitalize from the expanding coke industry in India.
The joint program comes at an opportune moment when infrastructure, transportation and housing activities in India are on the rise. This will lead to a jump in steel demand and in turn will increase the need for coke which is the primary input for steelmaking.
We believe this joint venture will certainly be a major revenue churner for the company, going forward. Other potential markets offering attractive prospects are the emerging economies of China and Brazil.
However, the weak U.S. coal market environment could thwart the company’s growth opportunities. Presently, the company carries a Zacks Rank #3 (Hold).
Based in Lisle, IL, SunCoke Energy, Inc. engages in mining and producing coke in the Americas. It offers metallurgical and thermal coal for steel making processes. The company has a market capitalization of $1.14 billion.
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