Ammonia Procurement Intelligence Report, 2023 - 2030 (Revenue Forecast, Supplier Ranking & Matrix, Emerging Technologies, Pricing Models, Cost Structure, Engagement & Operating Model, Competitive Landscape)

Ammonia Category Overview

The ammonia category is anticipated to grow at a CAGR of 5.4% from 2023 to 2030. Asia Pacific region dominated the category with more than 50% in 2022. According to Ammonia Energy Association, India accounts for 8% of the global production. A rise in the production of fertilizers is expected to drive the demand, as approximately 70% of this product is used to make fertilizers. Ammonia production also accounts for 1.3% of CO2 emissions, owing to which governments of various countries are focusing on adopting low-carbon ammonia to reduce greenhouse gas emissions. For instance, the Government of India approved USD 2.4 billion budget for National Green Hydrogen Mission in January 2023, which aims to achieve 5 million mt/year of renewable hydrogen by 2030. To achieve net-zero emissions, various new production methods are emerging, such as electrolytic hydrogen from green ammonia.

Companies have also started implementing measures to reduce carbon emissions in their existing plants. For example, in January 2022 Yara, signed an agreement with Linde Engineering for the construction of a 24MW green hydrogen demonstration facility at its ammonia production plant in Norway. This will demonstrate the production of the product through renewable energy and eventually reduce CO2 emissions. The project will be achieved by water electrolysis which will generate green hydrogen and replace the production of hydrogen based on hydrocarbon.

Additionally, the utilization of green ammonia as a raw material for manufacturing fertilizers and other chemical products offers an opportunity. This holds the capability to substantially reduce greenhouse gas emissions and contribute to the fight against climate change. Green ammonia can serve as a zero-carbon fuel in various sectors like transportation, heating, and electricity, in addition to its application as a fertilizer.

The ammonia category relies on raw materials such as natural gas and renewable energy sources for production. The bargaining power of suppliers depends on the availability and cost of these inputs. Even though these raw materials are abundant in nature, the availability of substitute for these raw materials and easy switching cost for product manufacturers makes the bargaining power of supplier low.

The category is highly competitive, with numerous global and regional players. These players are continuously focusing on research and development and expanding their production facilities in order to sustain themselves in the market. For instance, CF Industries Holdings, Inc., announced to purchase ammonia production plant from Incitec Pivot Limited located in Louisiana. The plant has a capacity of producing 880,000 tons annually. In 2023 Nutrien announced its intention to build the largest clean ammonia facility in Geismar, LA. It will be manufactured using innovative technology to reduce 90% of CO2 emissions. In 2022, Yara announced the construction of a renewable hydrogen plant in Australia that would supply green hydrogen to Yara with clean ammonia.

The cost of producing ammonia may range from USD 200 – 1000/ton. Raw material, electricity, labor, manufacturing process, machinery, packaging, and transportation are the major cost components in producing the product. Prices are interconnected to the prices of feedstock i.e., natural gas. Natural gas accounts for around 70 - 80% of the total cost of production. Prices of natural gas in Western Europe and Northeast Asia were around USD 35/MMBtu in March 2022. U.S. natural gas prices were at USD 5.00/MMBtu in March 2022 as compared to USD 2.60/MMBtu in March 2021. Natural gas prices are expected to highly impact the prices of ammonia.

While sourcing for this category, it is crucial to adhere to the best practices such as cost-effectiveness on bulk purchasing, compliance with regulations, and quality of the product. Businesses should verify supplier certifications such as Low Carbon Ammonia Certification, and ISO 9001. It is essential to confirm suppliers’ compliance with regulatory bodies such as Ammonia Energy Association, USDA, and others. Businesses also look for suppliers offering cash discounts on bulk purchases. Establishing open communication channels with suppliers fosters collaboration and enables ongoing improvement of sourcing practices.

Ammonia Procurement Intelligence Report Scope