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US July blue ammonia prices extend discount to Europe, Asia


Middle East prices rebound on tight supply

Europe, Asia green ammonia indicative bids rise

Green ammonia projects face price gap

  • Author
  • James Burgess    Staff
  • Editor
  • Jonathan Fox
  • Commodity
  • Electric Power Energy Transition Natural Gas Shipping
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  • Solar energy United States Wind energy
  • Topic
  • Energy Transition Environment and Sustainability Hydrogen: Beyond the Hype

Ammonia prices in the Middle East rebounded sharply in July on tighter supply, while prices in the Atlantic Basin continued to slide as European feedstock gas prices retreated further, widening the US discount to other regional pricing hubs.

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However, the market firmed as the month progressed, with tightening supply outweighing slow demand.

Platts Ammonia Price Chart illustrates monthly averages of daily assessments for gray, blue and green ammonia across a range of geographies and delivery options. Platts is part of S&P Global Commodity Insights.

Early renewables-derived green ammonia price indications firmed ahead of growing market interest, although would-be buyers are cautious not to inflate the market before more regulatory clarity emerges from policy makers.

Indicative bids for renewables-derived ammonia emerged late July at $400-$600/mt for a long-term contract from 2028, delivered North Asia, a Middle East producer told S&P Global. Indicative bids for long-term contract deliveries to Europe from 2028 stood at $600-$800/mt, up from indications of around $400-$500/mt in March.

Until there is more clarity on green ammonia regulatory frameworks and support schemes, buyers will be cautious about revealing price levels they are willing to pay to avoid pushing the market up, the producer said.

Multiple potential buyers in Asia say they have no incentive to buy low-carbon ammonia at a premium in the absence of regulations and penalties for carbon-intensive gray ammonia.

And in North America, Canada's Nutrien suspended its 1.2 million mt/year low-carbon ammonia project at its existing facility in Geismar, Louisiana, as rising capital costs and uncertainty around the timing of new demand began to bite. The $2 billion facility was slated to be the world's largest clean ammonia plant.

Interest in ammonia pricing has spread beyond traditional fertilizer and chemical users to shipping and hard-to-abate industrial sectors as low carbon production pathways emerge.

While gray ammonia prices dominate the cheaper end of the selection, a steep decline in value is evident across blue ammonia production pathways since the start of 2023.

Green price challenge

The decline in global conventional ammonia prices has caused some concern among green ammonia project developers, whose projected production costs are now above prices in the conventional market.

Low-carbon ammonia project developers across the world are facing challenges securing final investment decisions, amid a downtrend in global spot ammonia prices and demand uncertainties, according to industry experts and an analysis of market data by S&P Global.

New project advancements have slowed in the low-carbon ammonia market, amid government policy delays to deal with worsening production economics, slow demand and supply chain issues.

The biggest barrier for projects is the cost difference between current unabated fossil fuel-based hydrogen and ammonia, and lower emission technologies. The current costs for electrolysis-based hydrogen production are double those of conventional steam-methane reforming (without CCS) -- utilizing natural gas as a feedstock -- according to a report by S&P Global.

Despite vast financial support schemes to incentivize production, bridge the cost gap and drive demand-side support, weaker spot ammonia margins have added pressure to developers' financials.

Uncertainties in pricing for low-carbon ammonia have forced project developers into strategic offtake contracts to lock in export demand in order to secure financing.

Total announced volumes for low-carbon ammonia and hydrogen memorandums of understanding and offtake contracts for the second quarter declined 77% and 96%, respectively, from the first quarter, with the decline attributed to market uncertainties, according to data from S&P Global.

Click here to explore our interactive ammonia price chart

Platts Ammonia Price Chart

UK plant closure

In Europe, the UK could see increased ammonia imports as CF Fertilisers announced plans to permanently close its 495,000 mt/year ammonia plant at Billingham and cover its requirements through imports.

Meanwhile, with demand emerging from India and availability in the Middle East and Southeast Asia slim, the market east of the Suez Canal was firm throughout July.

Conventional ammonia FOB Middle East averaged $269/mt in July, up 9% month on month, while CFR Far East Asia prices were up 4% at $354/mt.

In late July, Yara and Mosaic settled at $295/mt CFR Tampa for August deliveries -- the first month-on-month, albeit modest, increase at Tampa since October 2022. Traders put the increase in part down to firmer European prices in previous weeks.

Renewables-based prices

Platts renewable-power derived ammonia prices are more stable than their gas-derived counterparts as they reflect long-term levelized costs of electricity for both solar and wind generation.

These are relatively static variables month on month, while the "delivered into" component of these assessments reflect weekly shipping prices.

As such, Platts blue ammonia assessments have gone from a premium to renewable-derived green ammonia prices earlier in 2023 to a considerable discount, with green ammonia assessments averaging between $750/mt and $799/mt in July, slightly firmer month on month.

Platts is to launch low-carbon physical ammonia assessments for Japan and South Korea -- the Japan & Korea Ammonia Price, or JKAP -- with a target date of Sept. 1, 2023, S&P Global head of energy transition pricing Alan Hayes said July 5 on the sidelines of the Tokyo Commodity market Insights Forum.

The assessment will be a market-based price with a carbon de-escalator. JKAP assessments will be for low carbon physical ammonia cargoes of 10,000 mt delivered into Japan and South Korea on a CFR basis for a 1-6 week forward period, Hayes said.