SunCoke: Idling doesn’t affect steel mill supply contract

From Illinois Business Journal news services

SunCoke Energy, Inc. says any idling of U.S. Steel’s Granite City Works will not affect the terms of a long-term contract to supply coke for the company.

SunCoke issued a statement Wednesday in the wake of U.S. Steel’s announcement that it is temporarily idling its Granite City Works flat-rolled operations subject to customer demand. That move is expected to lead to the layoff of more than 2,000 workers at the steel mill by the end of May.

“SunCoke Energy supplies coke to U.S. Steel’s Granite City Works under a long-term, take-or-pay contract until 2025 and the temporary idling doesn’t change any obligations for U.S. Steel under this contract. We value our long-standing relationship with U.S. Steel and will assist them in managing through the situation, which may include shipping coke to other U.S. Steel facilities,” the statemetn said.

Under take-or-pay, a company is obligated to pay a set amount for a supply product even when it does not take the product itself, which is common in the energy industry, which is seen as a means of protecting the supplier.

In January, SunCoke Energy, Inc. (SXC) entered into an agreement with SunCoke Energy Partners, L.P. (SXCP) to contribute a 75 percent interest in its Granite City cokemaking facility with a total transaction value of $245 million.

Approximately $45 million of the transaction value is to be used to pre-fund a future environmental project at Granite City, SXC has said.