Natural gas prices fell over the years as a result of an increase in supply following the shale boom in the US. The US has one of the largest reserves of natural gas. Natural gas is key for nitrogen as well as phosphorous fertilizers. Let’s look at how natural gas prices trended last week at Henry Hub in the US (VAW) and NBP (National Balancing Point) in the United Kingdom—two of the most heavily traded locations for natural gas.
For the week ending September 16, average weekly spot prices of natural gas at the Henry Hub rose by 5.1% to ~$3 MMBtu (million British thermal units)—compared to average weekly prices in the previous week. However, the one-month forward contract prices at Henry Hub remained unchanged at $2.68 MMBtu—compared to a week ago.
The one-month forward prices of natural gas at the NBP rose 1.2% to $4.2—compared to prices a week ago.
Natural gas prices impact costs for fertilizer producers such as CF Industries (CF), CVR Partners (UAN), Terra Nitrogen (TNH), and PotashCorp (POT). However, lower prices also invite increased competition.
Natural gas price forecast
In the latest Short-Term Energy Outlook issued by the EIA (U.S. Energy Information Administration), it maintained its 2016 forecast for average natural gas prices at Henry Hub at ~$2.42 per MMBtu.
For 2017, the EIA lowered its forecast of $2.87 per MMBtu from $2.95 per MMBtu. In 2015, the average price of natural gas at Henry Hub stood at $2.63 per MMBtu.
In the next part of this series, we’ll take a look at coal prices. Coal is an alternative input material for nitrogen fertilizer production.