Page 129 - CW E-Magazine (25-3-2025)

Point of View

Ammonia markets are evolving, but policy measures

will determine the pace of change

Ammonia and methanol markets have historically been driven by demand for nitrogenous fertilisers and chemicals respectively. More recently,
however, there are prospects for a huge leg-up in demand for these two basic chemicals – produced most competitively from natural gas –
as an energy source, directly and indirectly.

Ammonia is now viewed as a hydrogen carrier that can be moved across the world using existing infrastructure. The ships, terminals and
pipelines to carry it already exist in much of the world and can be scaled up to meet the additional demand expected.

Global ammonia markets
Global demand for ammonia is estimated at about 198-mt (in 2024), and nearly 85% goes to make nitrogenous fertilisers. Urea is the single-
largest, and its production alone accounted for 47% of global ammonia demand last year. Other fertiliser uses for ammonia include monoammonium/
diammonium phosphate (MAP/DAP), complex fertilisers (NPKs) and several nitrates. About 15% of ammonia is used for non-fertiliser applications,
including production of technical urea (for urea-formaldehyde resins), and technical ammonium nitrate (an explosive widely used in the mining),
as well as a few large volume chemicals (acrylonitrile, caprolactam and methyl methacrylate).

Urea and India
Growth rates for ammonia are largely determined by trends in fertiliser demand, and much of its increase in the recent past has been in the
developing world, notably India and China, which are agrarian, populous and economically on the rise. India is today the second largest consumer
of urea in the world, and the largest importer of this fertiliser. In addition, it also imports significant amounts of ammonia, pulling in about 2.38-mt
in 2024. More than 90% of imports came from the Middle East, notably Saudi Arabia, Iran, Oman, Qatar, and UAE, with small quantities coming
from as far away as Australia.

Urea is a politically sensitive commodity in India and every government regardless of political leanings has deemed keeping its price low as
one way of demonstrating commitment to farmers – an important vote bank. More recently, there has been a sustained and fairly successful
programme to raise domestic urea production – by reviving defunct plants, using coal as a feedstock, and the introduction of novel nano-formulations
that have been claimed to have superior efficacy in foliar use. As a consequence of all of these initiatives, urea imports into India fell in 2024, and
this trend may continue for another couple of years.

New energy demand
According to estimates by S&P Global Commodity Insights, a consultancy, global demand for ammonia is expected to rise to 360-mt by
2040 – a stiff increase for a basic chemical. Much of the increase will be driven by emerging ammonia uses, which includes use as: carrier for
hydrogen transportation and storage (12% share of total demand in 2040); bunker fuel in ships, substituting conventional fuels such as diesel
(10%); and for direct power generation using specially designed turbines (5%). Together, these new energy uses are expected to account for more
than a quarter of global ammonia demand, shrinking the share of fertiliser use to about 73% (from 85% now). Significantly, urea’s share of global
ammonia demand is expected to decline to about 30% (from 47% now).
Merchant markets
Another change expected is the merchant market for ammonia. Today, most urea producers (and several other ammonia users) are backward
integrated to ammonia. Only about 17.2-mt (out of the total merchant market of 43.3-mt) of ammonia is shipped internationally, with the remainder
(26.1-mt) consumed within the country in which it is produced.
The Russia-Ukraine war did take some merchant ammonia export capacity out of the market (roughly about 2-mt), but high prices that ensued
led to demand compression, leaving the overall markets comfortably supplied. Export capacity is expected to rise after 2027 in anticipation of the
new energy demands, and S&P Global Commodity Insights reckons this could go up to 31-mtpa by 2030, well above the anticipated merchant
demand of 22.5-mt.

Ammonia prices are cyclical and volatile, and influenced by various factors including the economic cycle and geopolitical tangles. The economic
slowdown of 2015-2020 kept prices depressed, even as the pandemic sent process soaring to record levels. While current levels are about a half
the peak reached, they are higher than the historical averages due the ongoing geopolitical uncertainties.

Manufacturing routes
Ammonia is mainly produced by the Haber-Bosch process from nitrogen (N ) and hydrogen (H ). While the former comes from air, the latter
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Chemical Weekly March 25, 2025 129

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