Natural gas continues to serve as the key raw material for nitrogen producers such as CF Industries Holdings (CF), Terra Nitrogen (TNH), PotashCorp (POT), and Agrium (AGU) in North America (MOO). While lower natural gas prices on the back of abundant availability provide positive direction for these companies, pressures from China remain an issue. China has aggressively expanded its capacity, causing nitrogen prices to fall.
Average natural gas prices at Henry Hub last week, which ended May 5, 2017, trended lower. Prices fell 39 basis points week-over-week to $3.09 per MMBtu (million British thermal units), from $3.10 per MMBtu. The one-month futures with a June expiration fell 1.4% week-over-week to $3.23 per MMBtu, from $3.28 per MMBtu at Henry Hub.
In the United States, Henry Hub is where natural gas is heavily traded. In the United Kingdom, the National Balancing Point is where it’s heavily traded.
In its recent report on April 11, 2017, the EIA (U.S. Energy Information Administration) forecast that natural gas prices in 2017 would be $3.10 per MMBtu. Natural gas prices are estimated to rise even more next year to $3.45 per MMBtu. According to the EIA, the rise in natural gas will be driven by two sources: an increase in domestic demand for natural gas and an uptick driven by exports.
Next, we’ll look at prices for phosphate fertilizers.