US CF benefitting from low natural gas prices

15 May 2012 20:19  [Source: ICIS news]

HOUSTON (ICIS)--Low natural gas prices are improving the profitability of nitrogen fertilizer production, US-based fertilizer maker CF Industries said on Tuesday.

"The increase in the production of shale gas will continue to drive down the cost of natural gas through 2012 and beyond," said Dennis Kelleher, CF chief financial officer at the BMO Capital Markets 2012 Farm to Market Conference.

"Increasing natural gas availability creates a low-cost environment that lowers production costs for nitrogen fertilizers and reduces input volatility," Kelleher said.

CF has been able to forward price about two-thirds of its near-term natural gas needs, locking in the cost of producing urea at about $150/tonne (€117/tonne) FOB (free on board) plant, Kelleher said.

About one-third of Illinois-based CF's urea production is currently exposed to the market price of natural gas, he added.

Kelleher said CF has a positive outlook for the fertilizer business in the years ahead based on the world's need for fertilizer to grow more crops such as corn.

The demand for urea is growing at a rate of 2-3%/year, and exports of urea from China will likely be trimmed in the future as it needs to use more urea at home, Kelleher said.

($1 = €0.78)

By: Frank Zaworski
+1 713 525 2653

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