Fertilizer Industry – Impact of Gas Prices on the Fertilizer Industry
• Monitoring world gas prices is an important factor to forecast urea fertilizer prices in Vietnam, while Brent oil prices play a decisive role in forecasting domestic gas prices for urea fertilizer production. If world gas prices tend to decrease, the increase in world urea fertilizer prices in the short term will also be restrained.o Domestic urea fertilizer prices are greatly affected by world fertilizer prices, with a correlation of up to 0.9 from 2019-2024.
o The world price of urea is closely related to the price of natural gas, because gas costs account for about 70-80% of the total cost of raw materials. When gas prices increase, urea producers will adjust the selling price accordingly. The correlation coefficient between TTF gas prices and urea fertilizer prices in regions such as India, the Black Sea, the Middle East, Egypt, and Indonesia is all over 0.78 in the period 2013-March 2025 .
o It is forecasted that the gradual decline in TTF gas prices may put pressure on the increase in fertilizer prices in the near future.
• Companies like DCM and DPM use Brent crude oil as a key reference for tracking input gas prices. This is because they purchase gas from PVN at prices determined based on Brent and FO, rather than international gas prices like many global companies. As a result, the gross profit margins of Vietnamese fertilizer companies tend to fluctuate more sharply compared to global firms, especially during the 2022-2023 period.
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