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According to a recent analysis by S&P Global Commodity Insights, the global ammonia market is expected to experience a threefold increase in the coming decades, driven primarily by the growth of low-carbon ammonia. With decarbonization policies fueling improved economics, low-carbon ammonia is projected to reach from its current nascent state to 420 million tons, accounting for two-thirds of the total market, by 2050.
Sean Mulholland, Director, Agribusiness Consulting, S&P Global Commodity Insights stated, “Decarbonization policies, including incentives in the U.S. Inflation Reduction Act and the EU’s Carbon Border Adjustment Mechanism, are transforming the economic fundamentals of low-carbon ammonia. The transition from concept to reality is already happening.”
The strategic report titled “Low-carbon Ammonia: Facilitating the Transition to a Sustainable Future” highlights the potential of low-carbon ammonia in various sectors, such as marine bunker fuel, industry feedstock, and as a carrier for hydrogen used in power generation. This shift marks a profound transformation for the ammonia industry, transitioning it from its traditional focus on fertilizer production to becoming increasingly driven by energy markets.
S&P Global Commodity Insights anticipates that global trade of ammonia will soar nearly tenfold by 2050, reaching 160 million metric tons. While most ammonia is currently consumed on-site for the production of other traded goods, low-carbon ammonia is expected to be more frequently traded as a standalone commodity. As a result, major exporters are projected to emerge in the Americas, the Middle East, and Australia, while Europe and East Asia are expected to become significant demand centers.
Ryan Monis, Director of Chemical Consulting at S&P Global Commodity Insights, commented, “The rapid growth in ammonia driven by low-carbon supplies will change the current market beyond recognition. The diversification of supply routes, and demand applications will introduce carbon capture, renewables, power utility and shipping market participants to an industry currently dominated by fertilizer producers.”
The analysis highlights the growing pipeline of low-carbon ammonia projects, attracting a broader range of market participants, including public utilities, oil and gas majors, investment funds, and others. Additionally, joint ventures between renewable energy producers, hydrogen producers, and ammonia producers are likely to emerge as the industry expands.
While decarbonization policies have provided strong momentum for low-carbon ammonia, several factors will influence the market’s composition. S&P Global Commodity Insights expects “blue” ammonia, produced through hydrocarbon-based production coupled with carbon capture and storage, to be more economically viable than conventional production in certain key markets before 2030. However, the cost competitiveness of “green” ammonia, produced from renewable electricity, will require further policy support to make it viable in most markets.
The report also emphasizes the importance of developing certification and classification systems to facilitate international trade, clarifying acceptable emissions thresholds for hydrogen and ammonia in major markets’ decarbonization plans, and advancing innovation and efficiency improvements for ammonia’s use in power generation.
“Despite some policy and technological uncertainties remaining, it is now clear that the fundamental economics of low-carbon ammonia have been transformed. We expect the number of projects reaching Final Investment Decisions to accelerate significantly in the coming years, not only in production capacity but also in the associated infrastructure required to take the low-carbon ammonia market from concept to reality,” stated Ryan Monis.
S&P Global Commodity Insights has introduced a new Monthly Low-carbon Ammonia Report service, providing business intelligence and short-term forecasts for the low-carbon ammonia market as a separate sector. The report is produced by Fertecon, the fertilizer analysis team at S&P Global Commodity Insights, which has been a leading provider of data and insights for ammonia for over four decades.
