Fertilizer Company Releases Natural Gas Cost Advantage, Executives Cash In on Opportunity with Substantial Profits

Caixin March 22 News (Editor Zhao Hao) As the Middle East conflict erupts, executives of U.S. fertilizer manufacturers have cashed out over $30 million as their stock prices rose. The company’s stock price was significantly boosted due to access to low-cost U.S. natural gas.

Because energy facilities in the Gulf region face risks and the Strait of Hormuz is “effectively closed,” the global energy market remains volatile, severely impacting industrial supply chains. Natural gas prices in Asia and Europe are much higher than in the U.S.

Natural gas is a key raw material for producing urea, ammonia, and other nitrogen fertilizers, which support about half of the world’s food production.

CF Industries, headquartered in Illinois, USA, became one of the early winners in the Middle East conflict. Since the outbreak of the conflict, its stock price has increased by 25%, ranking third among the S&P 500 component stocks.

The company’s plant in Louisiana—including the world’s largest ammonia production facility—is located 60 miles from the U.S. natural gas trading hub in New York.

Last Friday, natural gas prices at this hub were about $3 per million British thermal units, while the Asian benchmark price, JKM, was around $22.

Regulatory filings show that over the past three weeks, insiders at CF Industries have sold a total of $33.4 million worth of company stock.

Last week, an American agricultural coalition filed lawsuits against several fertilizer companies, accusing them of collusion to inflate prices, with CF Industries among those named. In response, the company stated: “We have received the complaint and deny these unfounded allegations. We will actively defend ourselves.”

In its annual report released last week, CF Industries acknowledged that in an industry where global product prices are determined by high-cost natural gas producers, its “ability to access low-cost and abundant natural gas resources” provides a structural advantage.

Meanwhile, the U.S.-listed chemical company LyondellBasell has seen its stock price rise 26% since February 28. Morgan Stanley estimates that, due to the effective closure of the Strait of Hormuz, about 9% of global plastic trade flows have been affected.

LyondellBasell CFO Agustin Izquierdo said at the JPMorgan Industrial Conference on Tuesday that the Iran conflict has driven up prices for products like polyethylene used in packaging and polypropylene used in manufacturing auto parts and medical devices.

North American petrochemical plants typically use locally sourced, lower-priced natural gas liquids (such as ethane), which have remained relatively stable since the conflict began; in contrast, European and Asian plants rely more on naphtha, whose prices have surged in recent weeks.

JPMorgan analysts pointed out that over 50% of naphtha in Asia comes from the Middle East, forcing producers in Japan and South Korea to cut output.

Izquierdo said that a $100 per ton increase in polyethylene prices could bring about $320 million in profit growth for LyondellBasell, and added, “We still have 5% to 10% capacity for expansion, which is clearly very favorable for us.”

Ross Eisenberg, head of the U.S. plastics industry organization, stated: “Compared to other regions globally, U.S. chemical and plastics manufacturers are in a more advantageous position because we rely on domestic shale gas.”

However, he also warned: “If the conflict persists long-term and reduces global oil and gas supplies, even with the advantage of shale gas in the U.S., there could be chain reactions that push up input costs for plastics and petrochemical production.”