Impact of Rising Natural Gas Prices on U.S. Ammonia Supply

by Wen-yuan Huang

The volatile and upward trend in U.S. natural gas prices from 2000-06 has led to a 17-percent decline in the Nation's annual aggregate supply of ammonia. During the period, U.S. ammonia production declined 44 percent, while U.S. ammonia imports increased 115 percent. Also, the share of U.S.-produced ammonia in the U.S. aggregate supply of ammonia dropped from 80 to 55 percent, while the share from imports increased from 15 percent to 42 percent. Meanwhile, ammonia prices paid by farmers increased from $227 per ton in 2000 to $521 per ton in 2006, an increase of 130 percent. Natural gas is the main input used to produce ammonia. Additional increases in U.S. natural gas prices could lead to a further decline in domestic ammonia production and an even greater rise in ammonia imports.

Keywords: Natural gas, ammonia, prices, ammonia supply, nitrogen fertilizers, agriculture, corn, fertilizer, cost, production capacity, nitrogen-saving

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