How Natural Gas Prices Are Moving

Natural gas prices are critical for nitrogen and ammonia-based phosphate fertilizer producers. The input cost of natural gas is highly volatile and may significantly affect the profitability of producers (MOO) such as CF Industries (CF), CVR Partners (UAN), Nutrien (NTR), and Mosiac (MOS). Let’s look at how natural gas performed last week.

Natural gas prices were broadly higher last week in North America. According to the EIA (U.S. Energy Information Administration), the prices for natural gas rose due to an increase in temperatures. As a result of higher demand for cooling, energy prices rose last week. Henry Hub spot prices rose from $2.78 per MMBtu (million British thermal units) to $2.86 per MMBtu.

Similarly, the June 2018 contract prices also rose week-over-week from $2.82 per MMBtu from $2.91 per MMBtu last week. The EIA stated that the supply rose by 1% week-over-week along with an increase in imports from Canada by 3%. However, the demand outpaced the supply, resulting in an increase in the price last week.

The EIA forecasts that natural gas prices will average $3.01 per MMBtu in 2018 and $3.11 per MMBtu in 2019. Both these estimates point to higher prices in the coming year, which may pressure some of the fertilizer producers.

Next, we’ll discuss DAP (diammonium phosphate).