Nitrogen Input: Natural Gas Prices Fell Last Week

In this part, we’ll discuss natural gas prices because natural gas is a key input material for nitrogen and ammonium phosphate fertilizers. It can account for almost two-thirds of the production cost for nitrogen fertilizers. Last week, the EIA (U.S. Energy Information Administration) issued its updated STEO (Short-Term Energy Outlook) report on October 11, which we’ll discuss below.

Last week, the natural gas prices at Henry Hub in the US fell 4.1% week-over-week from a weekly average of $2.96 per MMBtu (million British thermal units) to a weekly average of $2.84 per MMBtu. Henry Hub is the most actively traded point for natural gas in the US.

Fluctuations in natural gas prices are important for nitrogen producers (MOO) like CF Industries (CF), PotashCorp (POT), Terra Nitrogen (TNH), and Agrium (AGU).

In its latest STEO report published on October 11, the EIA stated that it expects the natural gas production to average 73.6 Bcf/d (billion cubic feet per day) in 2017—by 0.8 Bcf/d in 2016. In 2018, the levels will be higher by another 4.9 Bcf/d from the levels in 2017. Higher production will certainly pressure natural gas prices. However, a lot depends on the demand and weather as well.

For 2017, the EIA forecast that natural gas prices will average $3.03 per MMBtu. In 2018, the prices are expected to average $3.19 per MMBtu.

Next, we’ll discuss the weekly movements in phosphate fertilizer prices.