MARKET COMMENT: Ammonia market tightness lifts ammonia-to-hydrogen production costs above €5/kg

LONDON (ICIS)–Ammonia markets saw continued uptick over week 38 as European market participants refrained from ramping up production, leaving the market tight on account of high gas prices. As such, the ICIS ammonia-to-hydrogen assessment for northwest Europe pushed above the €5/kg mark, a level last recorded in March 2023.

Ammonia producers have been waiting for more stability at Europe’s gas hubs before returning to operations. However, a higher reliance on LNG imports to meet demand in the absence of Russian pipeline gas has contributed to highly volatile gas markets.

Over week 38, continued issues with Norwegian offshore gas assets returning from maintenance, paired with a drop in flows to US Gulf Coast Sabine Pass LNG lifted gas prices, further pressuring ammonia producers into purchasing import cargoes rather than producing in Europe.

Bullish activity on EU gas markets also lifted domestic hydrogen production costs, however, with low-carbon ATR-based hydrogen using front-month Dutch gas climbing €0.16/kg week on week in week 38. The production method was assessed at €3.18/kg on Thursday, including capital cost recovery.

Comparatively, electrolytic hydrogen production costs using Dutch front-month power prices remained above €6/kg for the second week in a row.

The ammonia-to-hydrogen assessment reflects the cost of importing fossil-based ammonia to northwest Europe and then decomposing that ammonia into hydrogen. The ammonia price referenced is the ICIS CFR Northwest Europe Duty Unpaid assessment, published every working Thursday.