Northwest Europe ammonia-to-hydrogen production costs near 14-month low

LONDON (ICIS)–The ICIS Northwest Europe ammonia-to-hydrogen assessment fell in value for the sixth straight week in mid-January with European ammonia production showing signs of increasing further as natural gas pricing in Europe has eased back recently.

The ammonia-to-hydrogen northwest Europe assessment came in at €8.42/kg on 19 January, the lowest value for the contract since late November 2021 and less than half the €12.85/kg value recorded in April last year.

The ammonia-to-hydrogen premium over fossil-fuel based hydrogen production methods remained broadly steady on a weekly basis with the falls in ammonia pricing matched by drops in values on the European natural gas hubs.

Both front-month based unabated SMR and low carbon ATR hydrogen production held discounts of €3.69-4.20/kg below imported ammonia-for-hydrogen.

AMMONIA MARKET

The international ammonia market started to pick up during the trading week following a very sleepy start to 2023, but demand remains weak and prices continue to feel downward pressure.

Small lots have been agreed out of Asia and into Turkey and Europe, but most business is under contract.

The drop in natural gas prices remains a feature and globally buyers and sellers are keen to learn if and when European production will resume, particularly in light of production costs running into the $700s.

A number of European producers were said to have started to ramp up ammonia production, with OCI confirming it has increased its ammonia run rates.

Meanwhile, ammonia markers and fertilizer producers continue to buy ammonia, with the most recent transaction between Borealis and Trammo.

GAS MARKET

The ICIS Dutch TTF February contract showed signs in mid-January of finding some support after having dropped sharply in value over the past few months.

The TTF front-month contact has hovered around the €60/MWh mark in recent days, arresting the recent bearish trend on the back of mostly mild temperatures and plentiful LNG volume deliveries leading to healthy storage stock levels.

However, support has been found from cooler temperature forecasts and weaker Russian gas flows into the region, which has increased reliance on storage withdrawals to balance the system.

Data from ICIS showed that European Union gas stocks began the 19 January gas day with a total of 897TWh (84.8 billion cubic metres) in stock; about 80% capacity. This is way ahead of the 664TWh five-year average for the time of year as well as the 496TWh from the same time in 2022.