Weekly Update: How Phosphate Stocks Performed Last Week
Why ammonia prices matter
Ammonia prices have been moving laterally since February 2016. To produce 1 metric ton of DAP (diammonium phosphate), about 0.23 metric tons of ammonia are required. Ammonia is used along with phosphoric acid for the production of DAP and MAP (monoammonium phosphate). Most of the global ammonia production is upgraded to other fertilizer products such as urea, UAN (urea ammonium nitrate), DAP, and MAP, which makes it critical to track ammonia prices.
Prices move sideways
The average price of ammonia for the week ended March 18, 2016, was $310 per metric ton, unchanged from the previous week. YoY (year-over-year), ammonia prices have declined 35%.
Natural gas prices
Natural gas prices have fallen from a high of $2.53 per MMBtu (British thermal units in millions) in early January 2016 to a four-year low of $1.49 per MMBtu in the week ended March 4, 2016. Last week, natural gas prices rose to $1.83 per MMBtu from $1.72 per MMBtu in the week ending March 11.
Low natural gas prices benefit the margins of companies such as CF Industries Holdings (CF), Terra Nitrogen (TNH), and Agrium (AGU). Eventually, phosphate producers such as Mosaic (MOS) will benefit from low natural gas prices. The SPDR S&P North American Natural Resources ETF (NANR) invests about 1.6% of its portfolio in Mosaic.
Natural gas prices have hit an all-time low because of high inventories and low demand as a result of warmer weather. The EIA (U.S. Energy Information Administration) forecasts the average Henry Hub natural gas price to be $2.25 per MMBtu in 2016. This represents a 14% fall from the average price of $2.63 per MMBtu in 2015.
For more updates on fertilizer companies, please visit Market Realist’s Agricultural Fertilizers page.
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