CF Industries Holdings, Inc. (CF), The Dow Chemical Company (DOW), EnCana Corporation (USA) (ECA): 3 Companies That Could Be Hurt by Rising Natural Gas Prices

Nucor Corporation (NYSE:NUE)
Steelmaker Nucor will see a big increase in its use of natural gas when it completes construction of its direct reduced iron, or DRI, facility. The company also uses a lot of gas throughout its U.S. steel manufacturing operations. Low natural gas prices are critical to its success; if they continue to stay low, the company could add to its DRI capacity.

With low natural gas prices being so critical to its success, the company has entered into a 20-year supply agreement with EnCana Corporation (USA) (NYSE:ECA) . The agreement should provide enough gas to offset the company’s usage at all of its steel mills, plus its two DRI facilities. That is, of course, if the Encana-operated wells produce enough gas to meet expectations. While the agreement has Nucor’s natural gas use well covered, the company is still joining The Dow Chemical Company (NYSE:DOW) in the fight against exports. It sees that higher natural gas prices would negatively affect its competitive position.

My Foolish take
Most of the companies mentioned above hedge natural gas exposure in one way or another to help guard against price spikes. That doesn’t mean that the market won’t sell them off if natural gas heads higher. As an investor, it might not be a bad idea to seize that opportunity to hedge your own natural gas exposure and buy one of these heavy users.

The article 3 Companies That Could Be Hurt by Rising Natural Gas Prices originally appeared on Fool.com.

Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Nucor. The Motley Fool owns shares of CF Industries Holdings (NYSE:CF).

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