Nitrogen Fertilizer Input Cost: Natural Gas Prices Fell Last Week

For the week of December 6–13, 2017, natural gas spot prices at Henry Hub were broadly lower, according to the EIA (U.S. Energy Information Administration). Henry Hub in the United States (MOO) is where most natural gas trading takes place and is key to nitrogen producers such as CF Industries (CF), Agrium (AGU), PotashCorp (POT), and Terra Nitrogen (TNH), which use natural gas to produce nitrogen fertilizers.

In the same week, overall natural gas spot prices at Henry Hub fell 8.5% week-over-week to $2.67 per MMBtu (million British thermal unit) from $2.92 per MMBtu.

According to the EIA, natural gas prices fell in almost all US locations. However, in the Northeast United States, natural gas prices were broadly higher due to colder weather.

The futures prices for natural gas also fell last week by 7% to $2.72 per MMBtu from $2.92 per MMBtu.

The movements in natural gas prices are influenced by several factors. The stock of working natural gas is one of those factors, and last week natural gas stock fell 5% year-over-year to 3,626 Bcf (billion cubic feet).

On December 12, 2017, the EIA released its Short-Term Energy Outlook. In that report, the EIA forecast natural gas prices in 2017 to average $3.01 per MMBtu, which was unchanged from its previous report. However, it raised its price outlook for 2018 to $3.12 per MMBtu from $3.10 per MMBtu in the previous report.

Next, we’ll look at the price movements for phosphate fertilizers.