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Rising Anthracite Prices Pressure Chinese Fertilizer Producers

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Coal-based nitrogen

Producers in China primarily use coal as an input material to produce nitrogen, especially urea-based fertilizers. In contrast, natural gas–based fertilizer producers in North America (MOO) have been benefiting from lower-cost natural gas. China is the world’s biggest urea exporter. As a result, it’s impacted by price movements in coal along with movements in natural gas prices.

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Coal prices

Anthracite coal is used to produce nitrogen fertilizers. For the week ending November 18, average weekly anthracite coal prices in China rose 3.8%—compared to the previous week. The prices rose to $109.8 from $105.8 per metric ton. Excluding the effects of foreign currency, anthracite coal in China rose 5% on the back of the Chinese renminbi falling 1.2% against the US dollar.

Natural gas

When anthracite coal prices rise, it’s usually positive for natural gas–based producers. Natural gas prices also rose last week. Natural gas producers include CF Industries (CF), Terra Nitrogen (TNH), and Agrium (AGU).

According to CF Industries, in 2016, China saw anthracite plant closures that have resulted in a loss of 7.6 million metric tons per year. Chinese coal-based manufacturers have been facing price pressure and some of them have been selling below the cost of production, which could have sparked the closures.

CVR Partners (UAN) is based in North America. It uses pet coke, a coal-like substance, to produce nitrogen fertilizers. Weekly pet coke prices for the week ending November 18 stood at $48.5—unchanged from the previous week.

In the next part, we’ll discuss phosphorus fertilizers such as diammonium phosphates and monoammonium phosphates.

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