MARKET COMMENT: Northwest Europe ammonia-to-hydrogen production costs jump on bullish ammonia

Gary Hornby

29-Sep-2023

LONDON (ICIS)–The ICIS Northwest Europe ammonia-to-hydrogen assessment rose by more than 10% on a weekly basis heading towards October, with the price boosted by a bullish ammonia market at the end of September.

The ammonia-to-hydrogen assessment increased by €0.60/kg week on week to be assessed at €5.65/kg on 28 September, the highest valuation for the contract since early March, ICIS data showed.

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.

Low carbon hydrogen produced via steam methane reforming (SMR) with carbon capture and storage (CCS) attached using month-ahead Dutch gas was nonetheless largely flat on the week, climbing a mere €0.04/kg to €3.50/kg. Baseload electrolysis using Dutch front-month power prices posted a €0.06/kg fall in value on a weekly basis.

AMMONIA MARKET

Direction from the ammonia market came from news of the Tampa October contract climbing by more than expected, up $185/tonne from September due to tight global availability.

Spot ammonia prices edged up in other global regions as a result, with deals from Saudi Arabia and Algeria seeing price rises in addition to demand in Asia showing signs of picking up in pace.

In Europe, European producers are beginning to restart production of ammonia with natural gas prices having been much less volatile recently than over the past few months.

GAS MARKET

The price of the ICIS Dutch TTF October ’23 contract rose during the first half of the week amid concerns over LNG supply from Australia. However, the risk premium built up was wiped out as the contract headed towards expiry.

Temperatures are forecast in line with seasonal average into early October for the vast majority of Europe, set to limit heating demand as the gas winter begins.

With the warm temperature forecast, storage withdrawals will likely not be needed in the short-term, with data from ICIS showing that European gas stocks were 95% full on 28 September, already close to the level seen in mid-November last year when the withdrawal season began.

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