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.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
More from The Motley Fool
Why SunCoke Energy, Inc. Shares Dropped 11% in March and SunCoke Energy Partners Was Close Behind
SunCoke Energy is in a holding pattern right now, and that's left investors to wonder what could happen.
Is There Any Growth Left for SunCoke Energy, Inc. and SunCoke Energy Partners, L.P.'s Stocks in 2017?
Three big changes helped SunCoke Energy and SunCoke Energy Partners last year, but the biggest change is set to play out this year.
Why Steel Industry Suppliers Rallied in July
The steel industry has been a tough market for a while, but July was a good month with a tap-on effect for these key industry suppliers.