Organic fertilizer company capitalizes on the cost advantage of natural gas releases, with senior executives taking advantage of the opportunity to cash out and profit greatly.

As the Middle East conflict erupts, executives of American fertilizer manufacturers seized the opportunity to cash out over $30 million as their stock prices surged. Due to access to low-cost American natural gas, the company's stock price was greatly boosted. With energy facilities in the Gulf region at risk and the Strait of Hormuz effectively closed, the global energy market continues to be turbulent, industrial supply chains are severely impacted, and natural gas prices in Asia and Europe are significantly higher than in the United States. Natural gas is a key raw material for producing urea, ammonia, and other nitrogen fertilizers, which support about half of the world's food production. CF Industries based in Illinois, USA, has become one of the early winners in the Middle East conflict. Since the conflict erupted, its stock price has risen by 25% and ranks third in terms of increase among the S&P 500 index components. CF Industries' factories in Louisiana, including the world's largest ammonia production base, are about 60 miles away from the American natural gas trading Hub Group, Inc. Class A. Last Friday, the price of natural gas for Hub Group, Inc. Class A was roughly $3 per million British thermal unit, while the Asian benchmark price JKM was around $22. Regulatory filings show that insiders at CF Industries have collectively sold company stocks worth $33.4 million over the past three weeks. Last week, an agricultural alliance in the United States filed lawsuits against several fertilizer companies, alleging collusion to raise prices, with CF Industries included. In response to the lawsuit, the company stated, "We have received the complaint and refute these baseless allegations. The company will actively defend itself." In its annual report released last week, CF Industries admitted that in an industry where global product prices are determined by high-cost natural gas producers, they "are able to access low-cost and abundant natural gas resources," giving them a structural advantage. At the same time, since February 28th, the stock price of the chemical company LyondellBasell, listed in the United States, has risen by 26%. Morgan Stanley estimates that about 9% of global plastic trades are affected due to the effective closure of the Strait of Hormuz. Agustin Izquierdo, the CFO of LyondellBasell, stated at a J.P. Morgan industrial conference on Tuesday that the conflict in Iran has driven up product prices, such as polyethylene used for packaging, as well as polypropylene used for manufacturing automotive parts and medical devices. North American petrochemical plants typically use lower-priced domestic natural gas liquids, such as ethane, the prices of which have remained relatively stable since the conflict erupted; while European and Asian plants rely more on naphtha, the prices of which have increased significantly in recent weeks. J.P. Morgan analysts pointed out that more than 50% of naphtha in Asia comes from the Middle East, forcing chemical producers in Japan and South Korea to reduce production. Izquierdo stated that for every $100 increase in polyethylene prices per ton, LyondellBasell will see approximately $320 million in profit growth, and said, "We still have a 5% to 10% increase in production capacity, which is obviously very favorable for us." Ross Eisenberg, head of the American Plastics Manufacturers Industry Association, pointed out, "Compared to other regions in the world, chemical and plastic manufacturers in the United States are in a more advantageous position because we rely on domestic shale gas." However, he also warned, "If the conflict continues for a long period and reduces global oil and gas supply, even with the advantage of shale gas in the United States, it may still suffer chain reactions, thereby increasing input costs for plastic and petrochemical production." This article is reprinted from "Finance Association", author: Zhao Hao; GMTEight editor: Feng Qiuyi.