US Ammonia Producers Face Narrowing Natural Gas Cost Advantage

The natural gas cost advantage for US ammonia producers is shrinking heading into the fall application season. According to NGI's Bidweek Survey and Entropic Analytics, regional price hubs are tightening their basis advantages relative to Henry Hub.

During the core summer months, the Midcontinent region maintained the largest discount to Henry Hub, but its basis narrowed by 35 cents from June to August. The Gulf Coast basis at Houston Ship Channel also shrank by 22 cents over the same period, while Chicago Citygate's basis tracked similarly.

The Plains region, which includes Koch Fertilizer and Coffeyville Resources Nitrogen Fertilizers facilities in Kansas, provided the most geographically relevant ammonia supply for fall pre-plant nitrogen application. However, its basis compressed by roughly 33 cents from June to August, contributing to the shrinking natural gas-cost advantage.

This trend is squeezing margin cushions for multiple natural gas feedstock industries across these regions, including methanol and hydrogen production.