Ammonia’s price premium to conventional marine fuels is likely to remain wide for the remainder of the year thanks to high natural gas prices and the expected rebound in fertilizer demand in the fall.
4 August 2022
In July, northwest Europe grey ammonia was assessed at three times the price of very low-sulphur fuel oil (VLSFO), and at 2.2 times the price of marine gasoil (MGO) sold in Amsterdam-Rotterdam-Antwerp, Argus assessments showed. Grey ammonia in the US Gulf coast was pegged at 2.9 times the price of VLSFO and at 2.2 times the price of MGO sold in Houston.
Middle East grey ammonia had the most favorable pricing compared with conventional bunkers — at 2.2 times the price of VLSFO and at 1.6 times the price of MGO sold in Fujairah in July.
Ammonia is considered by the marine shipping industry as a future fuel that will help reduce emissions as it does not emit CO2 when burned. By comparison a tonne of residual fuel oil emits about 3.151t of CO2 and one tonne of MGO emits about 3.206t of CO2 when burned.
While ammonia is still only used as a marine fuel in pilot projects, the price spread is indicative of the challenges ahead of its growing use. Among the latest ammonia-fueled vessel projects announced are Japanese shipping firm NYK Line’s plan to develop an ammonia-powered tugboat in 2024-2025, and Singapore-based shipping company Pacific International Lines ordering four LNG-powered containerships, which will be also equipped with an ammonia-ready fuel tank, also for 2024-2025.
Prices for natural gas, a feedstock for ammonia, are not expected to ease for the rest of 2022 as the market responds to concerns Russia will continue to squeeze or cut natural gas exports to Europe. Western European ammonia producers continue to scale back output in response to the higher prices and increasingly seek imports from lower-cost sources. Germany’s BASF, for example, plans to cut its ammonia production in the event of gas supply shortages.
Separately US agricultural chemicals producer LSB Industries expects higher corn prices, driven by supply concerns from South America and the western US, coupled with strong demand for corn in China and resilient ethanol demand in the US, to support farmer earnings and support higher ammonia pricing through the fourth quarter and into 2023.
While marine fuel sales and consumption are not subject to greenhouse gas restrictions, fees or taxes, the EU has two proposals in the works that would change that. One proposal would add 100pc of marine emissions to the European emissions trading system (ETS) starting in 2024. An earlier proposal called for adding 20pc of emissions to the ETS from 2023, gradually increasing to 100pc from 2026. The proposals apply to emissions generated from burning the fuel.
By Stefka Wechsler
Related: Japan: MOU entered to develop ammonia-fuelled tugboat for Yokohama city
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Photo credit and source: Argus Media
Published: 8 August, 2022
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