What: Shares of SunCoke Energy (NYSE:SXC) fell 24.2% in November. That, however, is just a drop in the bucket for a stock that's seen its price fall over 80% in 2015. The company's controlled limited partnership, SunCoke Energy Partners LP (NYSE:SXCP), has pretty much followed the same trend, with a 36.5% drop in November and a year-to-date decline of just about 75%.
So what? SunCoke and SunCoke Energy Partners have the unenviable distinction of operating in both the coal and steel industries. The inclusion of the word "coke" in the company's name is not a reference to soda pop, but to a raw input to the steelmaking process. Coke is made with coal and used in blast furnaces to produce steel.
There are multiple problems here. First, steel-making coal is under pressure because supply has exceeded demand. That's a problem for the company's coal-mining business. It's also a problem for the company's coal logistics operations (which are largely housed in SunCoke Energy Partners) because U.S. met coal tends to be relatively expensive compared with other options and U.S. steel production has been hampered by a deluge of imports. This is pretty much the exact opposite of hitting on all cylinders. It's more like picking a fight with Mike Tyson when the boxer was in his prime.
So it shouldn't be surprising to find out that SunCoke has been bleeding red ink all year long. The November drop was just a continuation of the trend -- only it was probably exacerbated by news in mid-October and in late November that two key customers were idling steel mills that SunCoke supplies. Add in the ongoing struggles of coal miners, which have included several high-profile bankruptcies, and there's really no good news at all here.
Now what: SunCoke and SunCoke Energy Partners are somewhat unique suppliers and service providers in the coal and steel industries. While that's an interesting story in many ways, right now it's a massive liability. With investor sentiment negative on virtually anything touching coal and steel, most investors would probably be better off avoiding this pair, too.