Asia becomes cheapest blue ammonia location in August

Platts delivered blue ammonia prices in Asia became the lowest-cost global location for the first time since April, softening as conventional ammonia prices eased due to weak demand and plentiful supply from China and Southeast Asia.

Platts, part of S&P Global Commodity Insights, assessed blue ammonia CFR Far East Asia at an average $466 per metric ton in August, down 5% month on month.

Blue ammonia CFR US Gulf extended gains month on month to average $516/t, up 12%, while Northwest Europe remained the highest priced region, up 10% at $606/t.

Platts blue ammonia prices assessments are based on the conventional ammonia market price plus a premium reflecting the costs of carbon capture and storage.

The Platts Ammonia Price Chart(opens in a new tab) 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.

The green ammonia calculated costs of production assessments were broadly stable month on month. These are based on longer-term weighted average costs of capital and levelized power costs.

Platts assessed delivered green ammonia costs in a range of $905-$1,057/t, with the lowest cost for delivery to Far East Asia from Australia, and the highest delivered from west coast Canada to the same destination.

Japan Korea marker

The market-based low-carbon Japan Korea Ammonia Price (JKAP) was assessed in the range $440-$445/t CFR through August, down from $460-$480/t CFR in July, in line with conventional ammonia pricing in the Far East Asian market.

The assessment reflects the higher cost of freight to Japan over other Far East Asian markets from key supply hubs.

Market participants said, however, that no premium on conventional ammonia could be achieved yet in Japan and South Korea, with demand lacking and government price support not yet in place in either country.

However, indicative prices in the range $500-$750/t CFR Japan/Korea were heard from suppliers and traders for low-carbon, or blue, ammonia.

The cost to supply blue ammonia on a FOB basis was heard at $450/t FOB from a trader, though the origin was not specified.

Meanwhile, the Japan Ammonia Energy Substitution Index (AESI), which indicates what a power generation company in Japan may be willing to pay for ammonia as an alternative to traditional feedstocks such as coal and natural gas, increased in August, narrowing the gap between CFR price ideas for low-carbon ammonia and theoretical buyer willingness.

The Japan AESI climbed steadily through August from the mid $550s/t to nearly $580/t on the back of an uptick in Japanese power pricing.

Contract development

Green ammonia is expected to rely on long-term fixed contracts, while blue ammonia offers are moving towards index-based pricing.

However, there are complexities and trade-offs in developing these contracts, particularly due to uncertainties related to infrastructure and regulatory frameworks.

Willingness to pay for low-carbon hydrogen and derivatives such as ammonia is primarily driven by existing commodity prices and regional carbon regulations.

Ammonia producers prefer fixed prices for long-term contracts, while buyers seek pricing that makes economic sense, an ammonia project developer told Commodity Insights.

Buyers are reluctant to lock in prices too far out, favoring three-to-five-year contracts, with a view that prices will decline.

North American projects

The US maritime sector is leaning towards index-based pricing, with blue ammonia potentially indexed to Henry Hub natural gas prices, the source said.

Canada is pursuing both green and blue hydrogen projects, targeting exports to Northwest Europe and East Asia.

The country recently invested C$300 million in an upcoming hydrogen trade corridor with Germany.

However, market sources say a major challenge lies in domestic rail transportation of long-haul ammonia trains.

Meanwhile, uncertainties surrounding policies like the EU's Carbon Border Adjustment Mechanism and hydrogen subsidies in the US, Japan and South Korea complicate the process of securing firm offtake agreements.