Chinese renewable ammonia targets Europe with sub-$700/mt FOB offers

Chinese renewable ammonia is being offered to buyers in the European market at a very competitive price, according to market sources. However, transportation of the ammonia to Chinese ports and compliance with European regulations might be potential barriers.

Renewable ammonia long-term offers from China reported to Platts have been mostly below $700/mt FOB, with the lowest offers being heard even below $600/mt FOB.

A Chinese source said, "All hydrogen producers are targeting Europe because of higher premiums achievable in that region."

Platts assessed Middle East Renewable-derived ammonia delivered into Northwest Europe at $837.5/mt on June 2.

Envision Energy recently announced a binding sales agreement to supply renewable ammonia to Japan's Marubeni from their 300,000 mt/year renewable hydrogen plant in Chifeng, Inner Mongolia. However, the details of the deal were not disclosed.

Multiple sources confirmed that the agreement with Marubeni involves a majority of the production volume and most of the volume is being offered to Europe. However, market sources suggested that while the ammonia will be compliant with EU regulations at the production facility, maintaining the carbon intensity below the EU threshold while transporting it to Europe might be a challenge.

A European buyer confirmed that Envision Energy has been "particularly ambitious in communicating lower prices for significant volume and long-term options." Another European trader said that Envision offers are being "talked in the range of mid-500."

Ammonia from the Chifeng project is expected to be produced using 100% renewable electricity and has been verified as renewable ammonia by Bureau Veritas.

An Indian producer said, "I doubt if the cargo will stay RFNBO-compliant while reaching Europe because transportation within China is a big challenge." He pointed out that currently only truck transportation is available to get the ammonia from Inner Mongolia to Jinzhou port, which is almost 300 kms.

Another Indian producer agreed that while the availability of pipeline or rail transport remains a challenge in China, the government can help build the infrastructure for the utilization of renewable energy capacity in Inner Mongolia.

Sources suggested that these projects might be receiving some subsidies from the government to reduce their costs, as it is difficult to achieve such low prices without receiving government incentives, while agreeing that renewable hydrogen production within Inner Mongolia is very cheap due to high and underutilized wind and solar capacity.

China's renewable energy curtailment rate in remote areas like Inner Mongolia has been growing, driven by unprecedented growth in wind and solar capacity, along with increasing reluctance among provinces to engage in electricity trading.

"China's green hydrogen and ammonia landscape has grown rapidly over the past 18 months, with more than 1 GW of electrolyzers now believed to be operating on renewable energy. It is one of the few places worldwide where we expect [green hydrogen] production costs to drop below $2/kg by the mid-2030s. Previously, we expected that most of this hydrogen would be produced and consumed domestically, but now we predict a greater focus on export markets, where there may be a higher willingness to pay," says Anri Nakamura, associate director at S&P Global Commodity Insights.

The European buyer said, "Chinese producers are in close contact with EU-approved certification bodies to get RFNBO compliance, and we do believe most of them could achieve this at FOB. Whether the volumes will still be RFNBO-compliant delivered to the EU or not is still the question as the journey adds significant carbon intensity and cost."

Chinese projects also have proximity to Asian demand markets in Japan and South Korea. In 2024, market sources reported that Chinese projects held a competitive advantage in the Korean hydrogen auction, however, the undisclosed price ceiling kept them out of the race last year.

Envision Energy and Marubeni did not reply to requests for comment.

Platts is part of S&P Global Commodity Insights.