Nitrogen fertiliser prices in GB rose in August 2023, as natural gas prices firmed according to AHDB analysis. The sterling weakening against the US dollar increased the cost of importing products to the UK, which due to the closure of UK fertiliser manufacturing facilities means increased prices for ammonium nitrate (AN) and Diammonium Phosphate (DAP).

UK produced AN with a 34.5% nitrogen (N) content rose £17/t from July to £370/t in August, while imported AN (34.5% N) rose £18/t to £362/t. Both prices are the highest reported since May. Over the same period, granular urea (46% N) gained £20/t to average £417/t, the highest price since April.

UK and European benchmark natural gas prices both rose in August. The spot UK futures contract peaked in the third week at 106.1 pence per therm on news that workers at two Australian Liquified Natural Gas (LNG) export facilities planned to strike. Prices then eased back slightly as the strike was postponed.

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Since Russia invaded Ukraine in February 2022, the UK and other European countries are much more reliant on imports of LNG. Australia is an important exporter of LNG, though not a major supplier of LNG to the UK and Europe according to Refintiv. Nonetheless, the two export facilities affected by industrial action account for 5% of global LNG supply as reported on Oilprice.com. So, a curtailment of Australian supplies still puts pressure on other sources to meet global demand.

Strike action began on September 8 in Australia and has escalated since. However, so far, warmer weather in Europe has meant lower heating demand and stronger winds have generated more power. As a result, there has been stability in energy prices in Europe and the UK. Also limiting the impact for now are fuller-than-average gas stores in Europe. Gas Infrastructure Europe reports that stores were 94% full by September 14, compared to 85% on average between 2018 and 2022 for the time of year.

While industrial action continues in Australia, it could support LNG and all-natural gas prices. Chinese demand for LNG has also been picking up recently, which could mean support for prices longer-term if it continues.

Meanwhile, winter weather across the northern hemisphere will influence gas demand for heating, and push up prices. Despite warmer-than-average conditions being forecast over the next few months across Europe, current prices for winter delivery are still higher than spot prices. While an even milder winter could pressure prices, a colder winter could mean volatility and price rises.

Any rises in natural gas prices in the months ahead are likely to translate into higher nitrogen fertiliser prices. Sterling has also weakened further against the US dollar in the last few weeks. Unless the exchange rate trend changes, it could push up the cost of fertilisers in the UK, even if natural gas prices don’t rise.