Commoditising hydrogen | International trading of green ammonia could begin as soon as 2025: Trafigura
Green ammonia derived from renewable hydrogen could become a tradeable commodity as soon as 2025, when the initial commercial-scale cargoes of the fuel begin shipping, global commodities trader Trafigura tells Recharge.
Ammonia (NH3) made from unabated natural gas — or “grey ammonia” — is already traded on global markets, but international commercial shipments of the green variety are not expected to begin for another two to three years, Julien Rolland, head of Trafigura’s power and renewables division, told Recharge on the sidelines of the Green Hydrogen Global Assembly in Barcelona last week.
Saudi Arabia’s 4.3GW Neom green hydrogen project is hoping to be one of the first to export green ammonia at scale in 2025, with Paddy Padmanathan, CEO of co-developer ACWA Power telling the conference that he expected it to ship 1.2 million tonnes by the first quarter of 2026.
A price benchmark for green hydrogen and its derivatives is heavily dependent on the ramp up of demand, Rolland told a panel session. “You are only going to start getting an indexation when you start producing and you start selling those products,” he said.
“The appetite comes while eating. Only when those molecules are going in the market that people will say, ‘hey, I want it and it’s quite good for me’. Or, ‘I need to be green’. Then the pricing mechanism will slowly put itself in place in a natural manner.”
It is thought that if green ammonia becomes a commodity in a globally competitive market, it would motivate producers to push down prices in order to maximise their profits, rather than being happy with high-priced, subsidised power-purchase agreements.
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However, Rolland said he did not believe that pure hydrogen — liquefied or compressed — would be traded internationally in a competitive market because there would not be sufficient volumes to warrant one.
Ammonia best candidate for shipping
Ammonia is the most likely green molecule to be shipped globally because it is easier and cheaper to handle than liquid hydrogen, which needs to be stored at temperatures of minus 253°C. The expense of transporting pure H2 is one of the reasons that the grey hydrogen used around the world today is usually produced very close to its point of consumption.
Ammonia also contains more energy by volume than pure H2 and is a valuable end product in its own right, used widely for fertiliser and chemical production. So a large international market for green ammonia is expected in the coming years and decades — especially if, as many expect, it will become a widely used zero-carbon shipping fuel.
In a December 2021 note, IHS Markit said that the commoditisation of “low carbon ammonia” — including blue ammonia derived from fossil gas and carbon capture — could hit 69 million tonnes by 2040, three to five times the size of the global trade in grey ammonia in 2020.
“The emergence of the green ammonia energy market — alongside the market for this commodity as a sustainable agribusiness feedstock — may lead to dramatic price shifts,” it wrote. “Firms need to incorporate green ammonia into their long-term forecasts.”
But the IHS analysts also noted that green ammonia could take over a decade to be fully commercialised. In this scenario, global trade flows would see low-carbon ammonia moving predominantly from the Middle East, Australia and Latin America in the direction of the East Asia and Europe.