US, Europe ammonia prices extend losses in June on weak demand, lower natural gas

Ammonia prices in the Atlantic Basin extended steep losses in June, with feedstock gas prices continuing to come off and demand remaining muted as buyers held off purchases waiting for further falls.

However, prices in Far East Asia rebounded, supported by an extended maintenance turnaround at a major production plant in Indonesia, while prices in the Middle East were stable.

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. Platts is part of S&P Global Commodity Insights.

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 has been evident across blue ammonia production pathways since the start of 2023.

Click here to see the full-size interactive ammonia price wall

Europe, US decline

In Europe, the EU reinstated import duties on ammonia after a six-month temporary suspension of duty on ammonia and urea (excluding product from Russia and Belarus) expired on June 17.

Cargoes from countries such as the US and Saudi Arabia are now subject to 5.5% duty. Ammonia prices in Northwest Europe were 10% lower month on month, averaging $352/mt in June, with blue ammonia prices falling in line.

In the US, Yara and Mosaic settled the Tampa contract for July deliveries at $285/mt, down $55/mt from previous month. Weak demand in the US has led to a ninth decrease in as many months. CFR US Gulf Coast prices averaged $328/mt for June, down 11% on the month.

Yara said it saw the US having a price advantage over Europe for blue ammonia production, driven by tax incentives under the Inflation Reduction Act and lower natural gas prices.

The US IRA, which offers tax credits for low-carbon hydrogen and ammonia production, "makes the US a highly attractive location for clean ammonia investments," Yara said in a results statement July 19.

Yara said it would prioritize investments in US clean ammonia to complement the company’s European footprint, as its fertilizer facilities are flexible on ammonia source, though it warned that competitive supply from the US to Europe could lead to reduced lifespan or impairments of European ammonia and fertilizer production assets.

It also noted a low-margin environment in Europe in the first half of 2023, as prices fell and fertilizer consumers delayed purchases.

East Asia uptick

Ammonia prices in Far East Asia, however, rose, after an extended turnaround at the 500,000 mt/year KPI plant at Bontang, Indonesia.

The Indonesian supplier turned buyer in June, securing volumes from neighboring and nearby producers at around $300/mt FOB to cover obligations in India and the Far East.

CFR Far East conventional ammonia averaged $340/mt during June, up 10% from May, while ammonia prices in the Middle East held firm around $277/mt FOB amid a lack of spot activity.

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's 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.

Hayes said the launch of JKAP will be "the next evolution of moving to market-based pricing" following the launch of the first hydrogen assessments in 2019 and subsequent launches of low carbon ammonia assessments for delivery into Europe and Asia, specifically in Japan.

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 reflects 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 $749/mt and $797/mt in June.

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