Nitrogen

Viewpoint: CBAM could draw nitrogen exports from the US

Viewpoint: CBAM could draw nitrogen exports from the US

Houston, 29 December (Argus) — US nitrogen producer CF Industries will have greater incentive to export nitrogen products to the EU once the Carbon Border Adjustment Mechanism (CBAM) comes into effect in 2026. The degree to which CF can capitalize on CBAM is still unknown, but the company has expressed a desire to do so. "Based on our conversation with customers, we also believe CBAM will drive significant demand for other low-carbon nitrogen products, such as UAN," said Bert Frost, CF executive vice president of sales. "We feel very confident in our competitive position," he added. The EU revised the default CBAM emissions value for US ammonia to 3.41 metric tonnes (t) of CO2 equivalent (CO2e), up from 2t of CO2e, according to preliminary documents, to the confusion of many traders across nitrogen markets. The new US default emissions values are based on ammonia produced using petroleum coke as a feedstock rather than natural gas like most nitrogen plants in the US. CBAM has assigned countries punitive default emissions values to motivate producers to verify their individual emissions with CBAM. In addition to using natural gas, CF's Donaldsonville facility in Louisiana, the largest nitrogen plant in the world, can capture its emissions for enhanced oil recovery and will sequester its carbon once its partner ExxonMobil acquires a class VI permit. If CF can successfully reduce its emissions at Donaldsonville and verify them with the EU, the carbon price paid by EU importers for nitrogen products from the plant would be much lower than the emissions tax paid when importing from other origins . That could create new export markets for the US producer across the EU, potentially tightening nitrogen markets throughout North America and altering global trade flows. Importers of urea from Algeria, Nigeria and Egypt into the EU would pay $52-57/t ($47-52/st) under CBAM in 2026, based on the 29 December EU ETS prompt price of $100.26/t. Donaldsonville would only have to verify a urea emission value 62pc below the default value of 2.31t of CO2e — also based on a petroleum coke feedstock — to bring the carbon charge paid by an EU buyer to zero, based on Argus calculations. Donaldsonville's competitive advantage could provide CF with an outlet for its nitrogen fertilizers during the summer and fall off-season or allow the producer to pit US buyers against the EU when US markets get more active. Similar to urea, CF would have to bring its default emission values for UAN down by 65pc from 1.76/t of CO2e to bring the carbon charge paid by importers to zero for 2026. The default carbon charge paid by importers of UAN from Trinidad & Tobago and Russia ranges from $82-104/t ($74-94/st). But again, producers in other countries may also verify carbon emissions lower than the default CBAM values. Ammonium nitrate has the highest carbon price associated with it under CBAM on a per unit nitrogen basis compared with urea and ammonia because of the carbon intensity of nitric acid production. Therefore UAN — in which nitrate is a primary feedstock — from Donaldsonville will have the largest competitive advantage of the facilities' products under CBAM. The Louisiana plant does not produce granular nitrate. How much urea or UAN CF can export will depend on how much ammonia it will have leftover for upgrades. CF says it can sequester 2mn t/yr of CO2e in its partnership with ExxonMobil and produce 1.9mn t/yr of "low carbon ammonia" from its Donaldsonville plant. That would account for half of Donaldsonville's gross ammonia capacity of 3.84mn t/yr. But the carbon intensity of its "low carbon ammonia" has not been disclosed, making it difficult to calculate the facilities' exact competitive advantage over other exporters to the EU. CF did not respond to requests for comment on the emissions from Donaldsonville ammonia and upgrades, or the "low-carbon ammonia" it plans to manufacture. CF shipped its first cargo of blue ammonia to Europe in October as part of a contract. The cargo had a "significantly lower well-to-gate carbon footprint than conventional natural gas-based ammonia production", the company said. CF reported its scope 1 emissions per metric tonne of ammonia at 2.11t of CO2e for 2024 across its facilities, already much lower than the default 3.41t. But that number includes emissions from upgrade units for urea and nitric acid, among others, meaning CF's emissions from a ton of ammonia before carbon capture were lower than 2.11t. CF also already has N2O abatement technology installed at a third of its nitrate units across its production sites, the company said. By Calder Jett Theoretical CBAM default charges for urea and UAN CBAM default emissions value t CO2e/t product Projected CBAM default charge $/t * CBAM default charge per tonne of nitrogen $ ** Urea (46pc nitrogen) US 2.3129 $143.72 $3.12 Egypt 1.4039 $52.58 $1.14 Algeria 1.4241 $54.61 $1.19 UAN (30pc nitrogen) US 1.7574 $115.10 $3.84 Russia 1.6463 $103.96 $3.47 Trinidad & Tobago 1.4342 $82.70 $2.76 *based on ETS prompt price of $100.26/t on 29 December; **nitrogen content of products can vary depending on plant — European Commission documents, Argus prices, Argus calculations Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.