Engineering News

Natural gas price a concern for US business -panel
Fri May 11, 2007 3:44pm ET

CHICAGO, May 11 (Reuters) - High natural gas prices are a big concern for U.S.-based big business, from chicken processors to steel producers to chemical companies, a panel of corporate representatives told an energy conference Friday.

Natural gas prices in the United States have been extraordinarily volatile in recent years, surging to a record high around $15 per million British thermal units in December 2005 in the wake of an active hurricane season that shut in production, before easing back into a range between roughly $6 and $8 this year.

"Our biggest concern as an end user is price. Our second concern is price and our third concern is price," Paul Ciesielski, natural gas manager for steel giant Arcelor Mittal, told the GasMart conference in Chicago.

Mittal, which represents 10 percent of the world's steel production and said it spent $1 billion in 2006 on natural gas, was joined by chicken powerhouse Tyson Foods Inc., chemical producer FMC Corp., and corn miller Corn Products International.

Tyson's commodity and trading risk manager, John Grass, said the company has a big interest in trying to mitigate price risks in the volatile natural gas market.

"Natural gas at $4 (per mmBtu) may not have a big impact on earnings, but $15 gas has an impact," Grass said.

Tyson's poultry, beef and pork processing facilities located throughout the United States run on natural gas, as do FMC Corp.'s chemical plants.

FMC's strategic sourcing manager, Tony Adamo, told participants FMC will spend more than $100 million in 2007 on electric power, natural gas and other energy products in North America.

The chemical industry is the largest consumer of natural gas in the United States. It also makes up 5 percent of the nation's gross domestic product, Adamo noted.

"The pricing impact of natural gas impacts our global competitiveness. It also can impact our budget, and nobody wants to surprise Wall Street," Adamo said.

Jack Neale, energy procurement manager for North American operations at Corn Products International, said his company uses only one-tenth of the natural gas that Mittal does but concurs that cost, providing budget consistency and reducing volatility are the company's biggest concerns when it comes to energy.

While all the companies said they hedge risks by purchasing not only physical supplies but futures and swaps, they also said they are turning to dual-fired generation at some plants as well as more efficiency from current units.

Some panelists also noted the high cost of natural gas was forcing some companies, particularly those with international interests, to seek production alternatives outside the United States.

"Unfortunately, yes, we do shift production when it makes sense to move to Mexico or overseas where it's possible," said Mittal's Ciesielski.

But Tyson's Grass said his company does not have the same option. "We make chicken. The USDA (U.S. Agriculture Department) doesn't like our chicken coming from somewhere else."

Source: Reuters

Engineering News Archive


Applicant Procedures
Job Seekers
Resume Help
Professional Organizations
Engineering Career Information
Engineering Colleges

Recruiters for
Professionals in the Chemical
& Pharmaceutical Industries
We recruit exclusively for Engineers and Operations/Maintenance Management Personnel in the following areas:
Specialty chemicals
Bulk chemicals
Commodity Chemicals
Fine chemicals
Industrial gases
Career Center | FAQs | Privacy
SESI Corporate Headquarters (954)755-3121 ext 109
© Search Enterprises, Inc. All rights reserved.
Industry News Career Center FAQs Submit a Job About Search Enterprises Submit a Resume Candidates Job Opportunities Search Enterprises Home