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European ammonia production remains uncompetitive

  • Spanish Market: Fertilizers, Natural gas
  • 12/05/23

Domestic ammonia production remains uncompetitive with imports into Europe, even as European gas prices have fallen to their lowest since July 2021.

The front-month contract at the Dutch TTF — Europe's most traded gas hub — closed below €35/MWh on Wednesday for the first time since July 2021. It has fallen by around 50pc since the start of the year, and is almost 90pc below its all-time high of €319/MWh in August last year (see TTF graph).

Gas accounts for the majority of European ammonia production costs, meaning that the dramatic fall in gas prices has dragged down domestic production costs. But import prices have fallen even further, meaning it is still more economical to import ammonia than to produce it domestically.

Domestic ammonia production briefly became competitive with imports again early this year, having been uneconomical for the second half of last year. But imports have again become cheaper than domestic production since 16 March, although the gap has narrowed in recent weeks (see production vs import graph).

This has led to production curtailments in Europe in favour of imports. As of the end of April, Europe's largest ammonia producer Yara had curtailed 2.8mn t/yr — or 58pc — of its European capacity. It took its 600,000 t/yr Ferrara plant off line in late April, just three weeks after bringing it back on line following a nine-month shutdown, and is planning maintenance at its 383,000 t/yr Tertre plant in Belgium in the second quarter.

German chemicals giant BASF similarly reduced its first-quarter ammonia production, and plans to permanently close one of its ammonia plants.

Instead of trading its own output, Yara has said it will "use its global sourcing and production system to import ammonia to Europe and supply global customers where possible". Its European production facilities are located near ports, "enabling imports of raw materials like ammonia to limit production costs when European gas prices are high", Yara said.

Yara's EU plants — excluding its UK facility in Immingham — consume roughly 36mn Btu of gas per ton of ammonia produced according to Argus consulting services. This suggests that 2.8mn t/yr of idled capacity as of the end of April equates to an annual loss of just under 2.5bn m³/yr of gas consumption. And if the 42pc production rate at Yara's plants were mirrored across the entire EU's 19.6mn t/yr of production capacity, this would translate into a gas demand cut of just over 10bn m³/yr.

Weak chance of 3Q demand revival

The significant reduction in ammonia production costs is yet to stimulate much greater downstream demand for fertilisers, and seasonally low third-quarter demand makes it unlikely that there will be an uptick later this summer.

The significant fall in ammonia production costs in recent months has only spurred a small amount of additional demand in Europe, India and China.

And global fertiliser demand is normally at its lowest in the third quarter, while the US' 1.3mn t/yr Gulf Coast ammonia plant in Texas is due to come on line in July, suggesting an oversupplied market, according to Argus' latest ammonia outlook.

Ammonia demand may only pick up from around September, which is when buyers typically begin accumulating fertiliser stock for the autumn application season.

Ammonia production vs import cost $/t

TTF month 1 Jun 2021-present €/MWh

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21/11/24

Cost of government support for fossil fuels still high

Cost of government support for fossil fuels still high

London, 21 November (Argus) — The cost of government measures to support the consumption and production of fossil fuels dropped by almost third last year as energy prices declined from record highs in 2022, according to a new report published today by the OECD. But the level of fiscal support remained higher than the historical average despite government pledges to reduce carbon emissions. In an analysis of 82 economies, data from the OECD and the IEA found that government support for fossil fuels fell to an estimated $1.1 trillion in 2023 from $1.6 trillion a year earlier. Although energy prices were lower last year than in 2022, countries maintained various fiscal measures to both stimulate fossil fuel production and reduce the burden of high energy costs for consumers, the OECD said. The measures are in the form of direct payments by governments to individual recipients, tax concessions and price support. The latter includes "direct price regulation, pricing formulas, border controls or taxes, and domestic purchase or supply mandates", the OECD said. These government interventions come at a large financial cost and increase carbon emissions, undermining the net-zero transition, the report said. Of the estimated $1.1 trillion of support, direct transfers and tax concessions accounted for $514.1bn, up from $503.7bn in 2022. Transfers amounted to $269.8bn, making them more costly than tax concessions of $244.3bn. Some 90pc of the transfers were to support consumption by households and companies, the rest was to support producers. The residential sector benefited from a 22pc increase from a year earlier, and support to manufacturers and industry increased by 14pc. But the majority of fuel consumption measures are untargeted, and support largely does not land where it is needed, the OECD said. The "under-pricing" of fossil fuels amounted to $616.4bn last year, around half of the 2022 level, the report said. "Benchmark prices (based on energy supply costs) eased, particularly for natural gas, thereby decreasing the difference between the subsidised end-user prices and the benchmark prices," it said. In terms of individual fossil fuels, the fiscal cost of support for coal fell the most, to $27.7bn in 2023 from $43.5bn a year earlier. The cost of support for natural gas has grown steadily in recent years, amounting to $343bn last year compared with $144bn in 2018. The upward trend is explained by its characterisation as a transition fuel and the disruption of Russian pipeline supplies to Europe, the report said. By Alejandro Moreano and Tim van Gardingen Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Investment funds’ net long on Ice TTF reaches new high


21/11/24
21/11/24

Investment funds’ net long on Ice TTF reaches new high

London, 21 November (Argus) — Investment funds' net long TTF position on the Intercontinental Exchange (Ice) jumped to a new all-time high earlier this month, outstripping the previous record in late August. The latest weekly data from Ice show investment funds' net long TTF position shot up to a new record at just under 273TWh by 15 November, topping the previous all-time high of roughly 268TWh in the week ending 30 August , revised data show. After peaking in August, the position dropped to 192TWh on 20 September, and held broadly stable before jumping 33.6TWh in the week ending 25 October . TTF prices rose in the following two weeks, but funds trimmed their net long position to around 226TWh on 8 November ( see graph ). But in the most recent week of data from Ice, investment funds' net long position shot up to just under 273TWh by 15 November, a new record high. Over the same period of 8-15 November, The Argus TTF front-month contract rose by more than 9pc, and there were similarly large moves for the first-quarter 2025 and summer 2025 contracts. The calendar 2025 price was also up by 8pc ( see table ). Significant price volatility in recent trading sessions has also prompted Ice to increase margin rates by around 20pc on all contracts out to September 2025 , with smaller increases further down the curve. Austrian incumbent OMV announced this week Russia's Gazprom would halt its contractual supply from 16 November , prompting sizeable day-on-day price moves across Europe and possibly encouraging investment funds to go longer and capitalise on the volatility. But central European flows have changed only slightly since then, with roughly the same amount of Russian gas entering the region. Higher TTF prices have also caused LNG diversions from Asia to Europe in recent days, which reached double digits on 19 November . Such a large net long position suggests investment funds may still expect a tight European gas balance this winter. Record-low freight rates have brought the cost of shipping US LNG to Asia closer to the cost of the shorter US-Europe route, meaning European prices have to rise sufficiently high enough to offset this and close the inter-basin arbitrage again in order to attract uncommitted cargoes. Cold weather has also prompted EU firms to draw down storage stocks heavily so far this month . Aggregate EU withdrawals averaged just under 3 TWh/d on 1-15 November, four times the 756 GWh/d average for that period in 2018-22 and sharply contrasting the 965 GWh/d of net injections across the bloc on 1-15 November 2023. Unlike investment funds, the two other major categories of Ice market participant — commercial undertakings and investment/credit firms — boosted their net short positions by a combined 53TWh, leaving the latter with nearly 200TWh in net shorts, the highest since mid-September. Despite significant storage withdrawals, commercial undertakings ‘risk reduct' contracts — generally used for hedging — in the week to 15 November jumped by just under 30TWh to nearly 211TWh, the highest since 24 December 2021. Some of that increase may have been driven by a need to hedge the LNG cargoes diverted to Europe in recent weeks as European hub prices rose. A 9TWh increase in the net long position of commercial undertakings' other contracts slightly moderated the overall net short increase. The gross short and long positions of commercial undertakings totalled 1.95PWh, nearly twice as large as the investments funds' 646TWh and investment/credit firms' 421TWh combined. By Brendan A'Hearn Argus TTF prices 8-15 Nov €/MWh Dec-24 1Q25 Sum 25 Win 25 Cal 25 8-Nov 42.08 42.31 40.81 38.41 40.65 15-Nov 46.02 46.12 44.12 41.00 43.98 % change 9.4 9.0 8.1 6.7 8.2 Argus Net positions on ICE TTF TWh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: Talks in Baku torn between mitigation and finance


21/11/24
21/11/24

Cop: Talks in Baku torn between mitigation and finance

Edinburgh, 21 November (Argus) — Developing and developed nations remain at loggerheads on what progress on climate finance and mitigation — actions to cut greenhouse gas emissions — should look like at the UN Cop 29 climate summit. But Cop 30 host Brazil has reminded parties that they need to stick to the brief, which is finance for developing countries. Concluding a plenary where parties, developed and developing, listed grievances, environment minister Marina Silva recognised "the excellent progress achieved" on mitigation at Cop 28. She listed paragraphs of the Cop 28 deal, including the energy package and its historic call to transition away from fossil fuels in energy systems. "We are on the right track," she said, talking about mitigation, but "our greatest obligation at this moment is to make progress with regard to financing". "This is the core of financing that will pave our collective path in ambition and implementation at Cop 30," Silva said, adding that $1.3 trillion for developing countries should be "the guiding star of this Cop". Parties are negotiating a new collective quantified goal (NCQG) — a new climate finance target — building on the $100bn/yr that developed countries agreed to deliver to developing countries over 2020-25. But developed countries insist that a precise number for a goal can only be produced if there is progress on mitigation and financing structure for the NCQG. "Otherwise you have a shopping basket but you don't know what's in there," EU energy commissioner Wopke Hoekstra said. Some developing nations said they need the "headline number first". Some developing countries, including Latin American and African nations as well as island states, have also complained about the lack of mitigation ambition. Cop is facing one of the "weakest mitigation texts we have ever seen," Panama said. But they also indicated that financial support was missing to implement action. Developed countries at Cop 29 seek the implementation of the energy pledges made last year. "What we had on our agenda was not just to restate the [Cop 28] consensus but actually to enhance and to operationalise that," but the text goes in the opposite direction, Hoekstra said, talking about the latest draft on finance. Whether hints that Brazil has mitigation in focus for next year's summit will be enough to assuage concerns from developed countries at Cop 29 on fossil fuel ambitions remains to be seen. The communique of the G20, which the country hosted, does not explicitly mention the goal to transition away from fossil fuels either. The developed countries' mitigation stance grew firmer after talks on a work programme dedicated to mitigation, the obvious channel for fossil fuel language, was rescued from the brink of collapse last week. Discussions have stalled, but another text — the UAE dialogue which is meant to track progress on the outcomes of Cop 28 — still has options referring to fossil fuels. But in these negotiations too, divisions remain. "The UAE dialogue contains some positive optional language on deep, rapid and sustained emissions reductions and the [Cop 28] energy package, E3G said. But Saudi Arabia has made clear that this was unacceptable, while India, which worked to water down a coal deal at Cop 26, is pushing back on the 1.5°C temperature limit of the Paris Agreement. Negotiators are starting to run out of time. Draft after draft, the divide fails to be breached with no agreement on an amount for the finance deal. "We cannot talk about a lower or higher number because there is no number," noted Colombia's environment minister Susana Muhamad. The next iteration should have numbers based on the Cop 29 presidency's "view of possible landing zones". The fact that the draft text on finance has no bridging proposal is a concern, non-profit WRI director of international climate action David Waskow said. Finance was always meant to be the centrepiece of Cop 29. Parties have not formally discussed the goal in more than 15 years, and have been trying to prepare for a new deal through technical meetings for the past two years. But the discussion needs to end in Baku. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Indian NP/NPK stocks drop to below 3mn t


21/11/24
21/11/24

Indian NP/NPK stocks drop to below 3mn t

London, 21 November (Argus) — India's domestic sales of NP/NPK fertilizers have continued to outpace both production and imports, leaving stocks below 3mn t for the first time since February 2023. Domestic sales of NP/NPK under the country's direct benefit transfer system amounted to 1.47mn t in October, up by 45pc on a year earlier. Sales from April-October — the first seven months of India's 2024-25 agricultural year — totalled 8.72mn t, up by 23pc on the year. Domestic NP/NPK production rose by 15pc on the year to 867,900t last month, putting April-October output at about 6.25mn t, up by 11pc on the year. NP/NPK imports in October amounted to 183,000t, up by 51pc on October last year. April-October imports amounted to 1.28mn t, down by 10pc year on year. The data imply total NP/NPK stocks in India of about 2.93mn t at the end of October, down by 12pc on the month and down by 15pc on the year. By Nykole King Indian NP-NPK stockbuild mn t Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: EU, four countries commit to 1.5°C climate plans


21/11/24
21/11/24

Cop: EU, four countries commit to 1.5°C climate plans

Baku, 21 November (Argus) — The EU, Canada, Mexico, Norway and Switzerland have committed to submit new national climate plans setting out "steep emission cuts", that are consistent with the global 1.5°C temperature increase limit sought by the Paris Agreement. The EU and four countries made the pledge at the UN Cop 29 climate summit in Baku, Azerbaijan today, and called on other nations to follow suit — particularly major economies. Countries are due to submit new climate plans — known as nationally determined contributions (NDCs) — covering 2035 goals to the UN climate body the UNFCCC by early next year. The EU, Canada, Mexico, Norway and Switzerland have not yet submitted their plans, but they will be aligned with a 1.5°C pathway, EU climate commissioner Wopke Hoekstra said today. The Paris climate agreement seeks to limit the global rise in temperature to "well below" 2°C and preferably to 1.5°C. Canada's NDC is being considered by the country's cabinet and will be submitted by the 10 February deadline, Canadian ambassador for climate change Catherine Stewart said today. Switzerland's new NDC will also be submitted by the deadline, the country's representative confirmed. Pamana's special representative for climate change Juan Carlos Monterrey Gomez also joined the press conference today. Panama, which is designated as carbon negative, submitted an updated NDC in June. It is planning to submit a nature pledge, Monterrey Gomez said. "It is time to streamline processes to get to real action", he added. The UK also backed the pledge. The UK announced an ambitious emissions reduction target last week. The UAE — which hosted Cop 28 last year — released a new NDC just ahead of Cop 29, while Brazil, host of next year's Cop 30, released its new NDC on 13 November during the summit. Thailand yesterday at Cop 29 communicated a new emissions reduction target . Indonesia last week said that it intends to submit its updated NDC ahead of the February deadline, with a plan placing a ceiling on emissions and covering all greenhouse gases as well as including the oil and gas sector. Colombia also indicated that its new climate plan will seek to address fossil fuels, but it will submit its NDC by June next year . By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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