THE PRICE of natural gas continues to drive up the cost of nitrogen fertilizer, forcing the industry toward more nitrogen fertilizer imports. It could get worse. Domestic natural gas futures are predicted to reach $12/one thousand cubic feet (Mcf) for October, about double what prices were a year ago.
Natural gas is the primary feedstock material for nitrogen production. Therefore, as domestic natural gas prices rise, it makes more sense to produce more nitrogen fertilizer overseas where natural gas is cheaper. Fertilizer, especially in granular form, is much easier to import than gas.
Overseas fertilizer plants are mostly located in the Middle East, where natural gas is a by-product of pumping oil out of the ground. In Saudi Arabia, the price of natural gas remains nearly static at less than $1/Mcf. Fertilizer plants also are booming in the Caribbean, where natural gas price is determined more by the price of NH3 in the U.S. Natural gas in Trinidad fluctuates at a level somewhere around $2.50/Mcf.