Cheap natural gas to bolster U.S. chemical companies

NEW YORK (AP) — U.S. chemical companies that use natural gas as a feedstock have an advantage over European rivals that rely on more expensive crude, a Citi analyst said Wednesday.

Analyst P.J. Juvekar noted that with natural gas prices expected to average around $3.85 per 1,000 cubic feet this year, it will still be a cheaper feedstock than crude oil.

Juvekar also upgraded chemical maker Cytec Industries Inc. and nitrogen producer CF Industries Holdings Inc. to “Buy” from “Neutral” for individual reasons. Juvekar also downgraded phosphates and potash producer Mosaic Co. to “Neutral” from “Buy.”

Cytec was upgraded because of its ability to make carbon fiber, which is becoming a bigger component of new aircraft models like the Boeing 787. Juvekar also favored CF Industries over Mosaic, noting that makers of nitrogen-based fertilizers will fare better than others as fertilizer demand falls after the North American harvest. Juvekar noted that farmers must apply nitrogen-based fertilizers every year, while they can skip applying other fertilizers made from phosphates or potash.

In morning trading, CF Industries shares rose by $3.20, or 2 percent, to $157.01 while Cytec Industries shares added $1.07, or 2.4 percent, to $47.02. Mosaic shares fell by $1.19, or 2.3 percent, to $51.40.