Sunoco 2009 Annual Report Download - page 29

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Our chemicals business competes with local, regional, national and international companies, some of which
have greater financial, research and development, production and other resources than we do.
Pipeline operations of Sunoco Logistics Partners L.P., or the Partnership, the master limited partnership in
which we hold a 33 percent interest, face significant competition from other pipelines for large volume
shipments. These operations also face competition from trucks for incremental and marginal volumes in areas
served by the Partnership’s pipelines. The Partnership’s refined product terminals compete with terminals owned
by integrated petroleum companies, refining and marketing companies, independent terminal companies and
distribution companies with marketing and trading operations.
Our cokemaking business is also highly competitive. Competition mainly impacts our ability to obtain new
contracts supporting development of additional production capacity, both in the United States and internationally.
Competitors include conventional chemical by-product coke oven engineering and construction companies, other
merchant coke producers and competitors that have developed and are attempting to develop heat-recovery
cokemaking technology.
The actions of our competitors, including the impact of foreign imports, could lead to lower prices or
reduced margins for the products we sell, which could have an adverse effect on our business or results of
operations.
The financial performance of our coke business is dependent upon customers in the steel industry whose
failure to perform under their contracts with us could adversely affect our coke business.
Substantially all of our domestic coke sales are currently made under long-term contracts with
ArcelorMittal, AK Steel or US Steel. In addition, our technology and operating fees, as well as preferred
dividends pertaining to our Brazilian operations, are payable under long-term contracts with a project company in
which a Brazilian subsidiary of ArcelorMittal is the major shareholder.
The global economic slowdown has had an adverse impact on the steel industry. In certain instances,
steelmakers have been suspending and renegotiating contracts with their raw-material suppliers in response to a
decline in steel demand. Some steel companies have been requesting that their suppliers cancel or postpone
deliveries, while others are refusing deliveries and buying their raw materials on the spot market where prices
have fallen below long-term contract prices. In the event of nonperformance by our current or future steelmaking
customers, our results of operations and cash flows may be adversely affected.
We are exposed to the credit and other counterparty risk of our customers in the ordinary course of our
business.
We have various credit terms with virtually all of our customers, and our customers have varying degrees of
creditworthiness. Although we evaluate the creditworthiness of each of our customers, we may not always be
able to fully anticipate or detect deterioration in their creditworthiness and overall financial condition, which
could expose us to an increased risk of nonpayment or other default under our contracts and other arrangements
with them. In the event that a material customer or customers default on their payment obligations to us, this
could materially adversely affect our financial condition, results of operations or cash flows.
We maintain insurance against many, but not all, potential losses or liabilities arising from operating hazards
in amounts that we believe to be prudent. Failure by one or more insurers to honor their coverage
commitments for an insured event could materially and adversely affect our future cash flows, operating
results and financial condition.
Our business is subject to hazards and risks inherent in refining operations, chemical manufacturing and
cokemaking and coal mining operations and the transportation and storage of crude oil, refined products and
chemicals. These risks include explosions, fires, spills, adverse weather, natural disasters, mechanical failures,
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