Natural Gas Prices Rose Last Week: Peril for Nitrogen Fertilizers?



Natural gas

Natural gas can account for as much as two-thirds of the total production costs for natural gas–based nitrogen fertilizer producers such as CF Industries (CF), Terra Nitrogen (TNH), PotashCorp (POT), and Agrium (AGU). In this part, we’ll discuss the weekly price movements for natural gas at Henry Hub in the US (SOIL). In the United Kingdom, the NBP (National Balancing Point) is where heavy natural gas trading takes place—similar to Henry Hub in the US.

Natural gas prices

For the week ending December 9, average weekly natural gas prices at Henry Hub rose 6.7% to $3.7 per MMBtu (million British thermal units)—compared to $3.4 per MMBtu the previous week. Similarly, the front-month (expiring in January 2017) futures rose 9% to $3.75 per MMBtu last week from $3.4 per MMBtu.

Last week, the front-month futures in the United Kingdom NBP fell as much as 7.5% week-over-week.

EIA’s forecast

In its latest December Short-Term Energy Outlook report, the EIA (U.S. Energy Information Administration) estimated an average price of $2.49 per MMBtu in 2016 at Henry Hub. For 2017, the EIA expects the natural gas price at Henry Hub to average $3.27 per MMBtu. Previously, it was $3.12 per MMBtu. In 2015, the average price of natural gas at Henry Hub stood at $2.63 per MMBtu.

In the next few parts, we’ll discuss the prices of phosphate fertilizers—diammonium and monoammonium phosphate.

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