Green ammonia prices and holding periods vary worldwide.
Sharing risks and staying competitive Offtake is difficult: Asian buyers
S&P Global Commodity Insights analysis shows price visibility is a global trend gaining traction in the emerging low-carbon hydrogen and ammonia market, with information helping participants secure competitive offtake contracts and project It is said that they are aware that it will be useful for bringing online.
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The market-based index for low-carbon ammonia rose 15% over the year, the index for low-carbon hydrogen rose 51%, and the total rose 42% year over year through April 26, according to S&P Global data. progress towards market transparency has been strengthened.
Stakeholders considering hydrogen as a decarbonization option are increasingly disclosing pricing details due to a growing desire to assess market value to drive market growth.
Global hydrogen production is expected to increase from 97 million tons in 2023 to 120 million tons in 2030 and 265 million tons in 2050, according to S&P Global’s Clean Energy Technology Analysis Market Outlook. There is.
Traditional hydrogen marketplace
Traditional hydrogen markets have traditionally relied on project financing for long-term infrastructure projects, with long-term offtake agreements structured before a project’s final investment decision.
These personalized, private supply agreements have helped secure financing, manage raw material price fluctuations, and reduce project risk. These have played a key role in supplying ‘gray’ hydrogen to end users such as refineries and ammonia producers. However, this market is dominated by a limited number of players, with limited price visibility and options making it difficult for new entrants to make informed decisions based on price references. It has become.
Historically, the high cost of transporting hydrogen has led industrial gas producers to build infrastructure in areas of demand, and these infrastructure costs have been built into long-term contracts. As a result, the first industrial gas operator to enter a region will have a competitive advantage on a regional basis, further reinforcing the limited options available.
However, the low-carbon hydrogen market is currently experiencing a surge in global investment and supply contracts. For example, Norwegian fertilizer company Yara and ACME Cleantech have signed a long-term offtake agreement to supply 100,000 tonnes of renewable ammonia per year starting in 2027. from now on. Auctions and tenders for low-carbon hydrogen and ammonia, such as Total Energy’s 500,000 tonne annual bid for green hydrogen for Europe, which is expected to be used in the IT refinery sector, support project developers and secure competitive prices. is becoming more common to secure structured contracts.
These more transparent transactions have enabled other companies to build business models using market-real prices and contract structures. The more transactions there are, the more price information is available, which increases transparency and creates a kind of virtuous cycle for investing.
Pricing becomes more visible
Renewable ammonia pricing information shared with S&P Global evolves from standard offtake contract structures and flat prices to regionally differentiated price ranges based on support schemes, renewable energy portfolios, obligations and optimal technology. did.
For example, market participants indicate that their willingness to pay (WTP) for Asia ranges from $550 to $650/month, with 15 to 20 year contracts being the most common, and 10 year contracts being the most common. Estimated price is $720. In the $750 range. Sources told S&P Global that WTP prices in Europe are indicated in the range of $600 to $1,000/tonne, with short-term contracts of 10 to 15 years being the priority, with long-term contracts also being offered. ing.
It has been pointed out that the contract period is related to the useful life of the plant and the debt repayment period, and short-term fixed price contracts are generally more expensive than long-term contracts.
Securing modest offtake agreements that share the project’s risks and offer competitive prices is difficult, prospective buyers of Japanese low-carbon companies told S&P Global Commodity Insights.
The renewable electricity-derived “green” ammonia rating for CFR Europe, based on Platts’ model, was $938.05 per kg as of April 22. Prices are for U.S. sourced materials and reflect the most competitive export prices among Middle East, USGC and Canadian East Coast exporters. Platts’ green ammonia CFR European prices are within the WTP range of $600-1,000/month shown in the European market, although there are some long-term contracts heard in the $600-750/month range. Above offer. This period also varies.
Platts Green ammonia destined for CFR Asia was also assessed on April 22 at $899.85/tonne for shipments originating from the Middle East, making it the most competitive price compared to products from Australia and the West Coast of Canada.
According to market data from Platts, market-based green ammonia values reported on a FOB basis for export will vary due to regulatory differences, regional renewable power pricing, portfolio composition, freight rates, etc. With all these variables in flux, today’s competitive advantage may not be available tomorrow.
“We feel this may be the year of increased green ammonia/hydrogen price forecasts and offers due to the lack of cheap green power prices,” said Ammonia Producers and Low Carbon Ammonia Developers at S&P spoke globally.
Platts is a member of S&P Global Commodity Insights.
