Natural gas prices rose by 13% w-o-w this week, reaching their highest level in three years. Renewed hostilities in the Middle East have raised concerns over further disruptions to liquefied natural gas (LNG) supplies to the European region.
On 2 September, front-month gas prices broke above €74/MWh at the Dutch TTF hub. The rally followed a recent wave of US strikes against Iran, exacerbating concerns over gas supply constraints, particularly with Qatar limiting its exports while demand remains robust.
The disruption comes at a critical time for Europe, as LNG deliveries are needed to replenish gas storage facilities ahead of winter. According to WFM’s information, European gas storage facilities were around 65% full as of 31 August, leaving stocks below historical levels for this time of year.
At the current feedstock gas price, ammonia production costs at Western European plants are estimated at around $940/t. Such elevated costs could force European fertilizer and chemical producers to reduce operating rates and increase reliance on ammonia imports. By comparison, foreign ammonia was nominally available at around $690/t CFR Northwestern Europe, CBAM excluded, last week.
