Calculators

In many periods since 1999, the high natural gas price in the US has created an effective “supply-driven” price for nitrogen producers, as fertilizer prices have been based on cash costs of production rather than prices driven by demand.

To calculate this “supply-driven” price at different locations, one has to consider the following:

• US cash cost of production 

• Terminal cost for import into the US 

• Freight costs for transporting to the US Gulf 

The corresponding US Gulf cfr price is calculated by deducting a terminal cost of approximately $12 /ton from the cash cost of production for a US Gulf producer at a given US gas price. Subtracting the appropriate freight charges from the US Gulf cfr price will then give the corresponding fob price at different locations, e.g. the fob Caribbean price, which is the reference listed in this website.

Below is an example that shows US cash cost and corresponding fob prices at different locations. All cost estimates are based on information published by Blue Johnson & Associates for a typical US plant located in Louisiana with zero cash margin. Cash costs exclude depreciation, corporate overhead and debt service.

Thus, in order to compare the calculated cash cost of production with reported market prices, one must include the terminal cost and transportation cost, if relevant.

Energy costs for ammonia swing producers in the US have historically set a supply-driven price floor for ammonia, which in turn has set a floor for the urea price.
In the past, when the urea price has dropped below the above-mentioned floor for a sustained period, less urea has been offered for sale. Instead, ammonia has been sold, until the relationship was restored.

US has anti-dumping duties on Russian and Ukrainian urea and therefore its main source of offshore imports is the Arabian Gulf.

Thus, in order to compare the calculated cash cost of production with reported market prices, one must include the transportation cost and terminal cost, if relevant.

Note that changing freight costs can alter the geographical differences considerably over time.

Note that for non-US producers, it is also appropriate to consider the relationship between ammonia price and urea price, i.e., the upgrading margin for converting ammonia to urea (0.6 * Ammonia + 15)