Northwest Europe Ammonia-to-hydrogen production costs dip on muted appetite for imports

LONDON(ICIS)–The ICIS Northwest Europe Ammonia-to-hydrogen assessment dropped €0.84/kg week-on-week as European production plants continued to reopen, adding supply to the market and reducing the need for imports.

Pressure to European spot gas markets also reduced production costs for low-carbon and unabated hydrogen on project breakeven basis in the Netherlands. This meant the spread between imported and domestic hydrogen production costs remained relatively flat compared with week 44.

Ammonia-to-hydrogen production costs are currently around €3-4/kg hydrogen higher than domestic production using front-month power and gas.

AMMONIA MARKET

Currently European buyers have little appetite for ammonia imports as some continental production plants have resumed operations amid lower natural gas prices. This has meant buyers are receiving volumes they secured earlier in the year to cover positions, but little further activity has been seen on the import side.

This pattern is likely to continue across the latter half of November and into December, ICIS insight showed.

European imports of ammonia were assessed at around $1000/tonne on 10 November. However, ICIS ammonia assessment data shows that spot ammonia imports were around $250/tonne at the end of 2020 and at early 2021.

GAS MARKETS

The Dutch TTF front-month contract posted losses compared with week 44 as above-normal temperatures reduced overall gas demand.

The fall in gas prices meant ICIS hydrogen production cost calculations for low-carbon and unabated hydrogen production also dropped.

European gas shippers continued to inject into storage sites on 10 November, ICIS data showed. Comparatively, withdrawals had commenced from 13 October in 2021 amid colder weather. Storage sites are currently 94% full, three percentage points above the same time in 2019.

Gas prices could begin to climb as Europe enters the colder months of winter, potentially lifting hydrogen production costs.