Natural gas prices
Natural gas prices are a key price driver for urea and other nitrogen fertilizers. An increase in natural gas prices can negatively impact margins for nitrogen fertilizer producers (MOO) such as CF Industries (CF), CVR Partners (UAN), and Nutrien (NTR). Natural gas prices are also critical for ammonium-based phosphate fertilizers.
Last week, the EIA (U.S. Energy Information Administration) reported that natural gas prices rose in most of the locations across the US. At Henry Hub, which is the most heavily traded location for natural gas in the US, prices rose to $3.26 per MMBtu (million British thermal units) from $3.13 per MMBtu, a 4.1% increase week-over-week. According to the EIA, prices rose as a result of cooler temperatures, which increase the need for natural gas, coupled with low inventories.
Last week’s natural gas prices went uncomfortably further from the EIA’s short-term outlook of an average of $2.99 per MMBtu for 2018. Last week’s prices were even higher than the EIA’s projection of an average of $3.12 per MMBtu for 2019. The next short-term energy outlook report is due on October 10. We’ll follow up with an update after it is released.
Next, we will discuss prices for phosphate fertilizers.