Far East Asia becomes cheapest region for blue ammonia in December

Platts-assessed blue ammonia prices slipped globally in December, with Far East Asia becoming the cheapest region, S&P Global Commodity Insights data showed.

Prices extend losses globally, tracking losses in conventional markets, amid slow spot demand and softer feedstock natural gas prices.

Platts assessed blue ammonia CFR Far East Asia at an average of $564/mt in December, the lowest priced delivery region, down by almost $100/mt from November.

Conventional ammonia suppliers in Far East Asia sought to clear stocks before the end of the year, adding to downward price pressure.

Calculated CFR prices on the US Gulf Coast and in Northwest Europe also fell, dropping to $616/mt and $640/mt, respectively, with steeper losses for Northwest Europe leading prices to converge.

Northwest Europe remained the most expensive region for deliveries, though the fall in blue ammonia price indications opened a substantial theoretical discount to green ammonia cost production assessments for Europe of over $100/mt.

The Platts Ammonia Price Chart illustrates monthly averages of daily assessments for gray, blue and green ammonia across a range of geographies and delivery options.

Blue ammonia is made from fossil fuel-derived hydrogen, capturing the associated CO2 emissions, while green ammonia uses hydrogen from renewables-powered water electrolysis. Assessments assume a levelized cost of renewable power input for green ammonia.

However, project developers in advanced discussions point to higher costs, given supply chain constraints, raw material and component inflation and higher costs of capital.

Europe CBAM boost

Europe's proposed Carbon Border Adjustment Mechanism will give a boost to the nascent clean ammonia market in 2024, potential producers told S&P Global.

"Offtake agreements will be found sooner in the European market due to CBAM and motivation to secure a non-Russian supply source," one ammonia producer said.

"CBAM will help get deals done in 2024," said another. "Plus Japan and South Korea contract for difference mechanisms will get up and running."

Japan, South Korea CfDs

The implementation of CfD schemes in Japan and South Korea could help hydrogen project developers targeting these markets sign offtake agreements with potential buyers.

Japan is to finalize a CfD scheme focused on ammonia co-firing in existing coal-fired power plants by March, with a first round of auctions to start in the following financial year.

The scheme will pay the difference between a strike and reference price, with the reference price reflecting the price of counterfactuals such as coal and LNG, while the strike price will be the agreed price for supply costs of hydrogen and ammonia.

A South Korean CfD scheme is expected to launch in 2024, allowing for clean hydrogen and derivatives bidding for power generation by making the costs of hydrogen competitive.

One potential issue for the Asian market is the availability of tankers for ammonia transport.

"Shipping capabilities is a big question mark right now with lack of availability of large ships in the market," a potential exporter to the Japanese and South Korean markets said.

A Maersk Tankers affiliate and Japanese trader Mitsui & Co. teamed up in December to order at least four very large ammonia carriers.

Market momentum builds

Momentum continues to build on the clean ammonia production side.

Saudi Arabia's ACWA Power signed a framework agreement to develop a 600,000-mt/year green ammonia plant in Egypt. Investment for the first phase of the electrolysis project is anticipated at over $4 billion, with plans to scale up to an ammonia capacity of 2 million mt/year in the second phase.

And Singapore's Sembcorp Green Hydrogen has signed a memorandum of understanding with Japan's Sojitz and Kyushu Electric Power to pursue potential opportunities for renewable ammonia production in India for export to Japan.

The news came as Japan's largest power generation company JERA signed a MoU Dec. 15 with Indonesia's state-owned oil and gas company Pertamina, to bolster fuels value chains and explore investments in the area of LNG, hydrogen and ammonia infrastructure.

In Europe, hydrogen power and generation company AFC Energy launched its ammonia-to-hydrogen cracker demonstration plant in the UK at the start of December, designed to produce 400 kg/day (140 mt/year) of fuel cell grade hydrogen.

AFC designed, built and commissioned the plant, which the company said is the world's largest operational demonstration plant, over the course of 2023.

AFC will operate and validate the facility over several months, with the hydrogen potentially supplying the company's H-Power fuel cell generators and third party customers.

Morever, the Intercontinental Exchange launched a new ammonia futures contract Dec. 11 based on the Platts Fertecon weekly CFR NW Europe duty paid/duty free assessment. It is the first ammonia futures contract in the region to be settled on a weekly assessment and established industry benchmark.