MARKET COMMENT: Northwest Europe ammonia-to-hydrogen production costs dip

Gary Hornby

01-Dec-2023

LONDON (ICIS)–The ICIS Northwest Europe ammonia-to-hydrogen price eased back to its lowest value in six weeks on the final day of November, but larger falls were witnessed in values of other forms of hydrogen generation.

The ammonia-to-hydrogen price fell by €0.08/kg on a weekly basis to stand at €6.07/kg on 30 November, the lowest value since 19 October.

The ammonia-to-hydrogen price 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.

Baseload electrolysis using Dutch front-month power prices recorded the largest weekly drop, down close to €0.50/kg week on week to come in at €6.44/kg, the lowest price since the end of September and a narrow €0.37/kg premium to ammonia-to-hydrogen.

Low carbon hydrogen produced via steam methane reforming (SMR) with carbon capture and storage (CCS) attached using month-ahead Dutch gas also saw a relatively large 8% drop of €0.33/kg to stand at €3.57/kg, an eight-week low.

AMMONIA MARKET

The settlement of the Tampa price for December dominated the ammonia market during the week, settled at $625/tonne CFR, remaining unchanged after some market participants had expected a fall in the price due to a lack of activity.

Demand continues to be set to remain muted for the remainder of 2023 and possibly into early 2024.

In Europe, producers are running at low production rates currently despite a fall in the European natural gas hubs, with no major demand currently in the market.

GAS MARKET

The ICIS Dutch TTF January ’24 contract fell back to its lowest level since January 2022 during week 48 as solid supply from both Norway and LNG terminals was met with expectations of milder temperatures on the horizon.

Indeed, data from ICIS showed that European LNG sendout was above the 500 million cubic meters (mcm)/day mark on 27 November, and Norwegian pipeline gas exports rose above 350mcm/day several times in the second half of November.

Temperature forecasts for week 49 from MetDesk show that above-average temperatures are due over Iberia and Turkey, with temperatures around seasonal norms for the UK and Italy and below-average conditions expected to central and eastern parts of Europe.

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