Natural gas is one of the key input materials for nitrogen fertilizer producers in North America such as CF Industries (CF), PotashCorp (POT), Agrium (AGU), and Terra Nitrogen (TNH). Natural gas prices trended lower week-over-week for the week ending April 21. Summer months are usually less demanding for natural gas. In North America (SOIL), natural gas is heavily traded at Henry Hub. In the United Kingdom, natural gas is heavily traded at the National Balancing Point.
Let’s look at how natural gas prices moved at Henry Hub last week.
For the week ending April 21, natural gas prices at Henry Hub in the US fell as much as 4% to $3.05 MMBtu (million British thermal units) from $3.17 MMBtu a week ago. Similarly, natural gas futures (with May 2017 expiry) also fell 4% to $3.1 per MMBtu from $3.2 per MMBtu.
Price declines for natural gas might appear positive for nitrogen fertilizer producers. However, price declines create a challenge because they lower the input cost for producers. Natural gas can account for as much as two-thirds of the prices for nitrogen fertilizers. Lower costs can bring down costs for marginal producers and realized prices.
To learn more, read Agricultural Fertilizer Industry: Your Comprehensive Overview.
Next, we’ll discuss prices for phosphate fertilizers.