Jennifer Willis-Jones, Head of FW Nitrogen at CRU, said she is not expecting a European squeeze on CO2 availability considering the ammonia forecast at the recent gasworld CO2 Virtual Summit.
Traditionally one of the largest sources of food grade CO2 in Europe has been from ammonia plants. CO2 is a by-product of ammonia which is the critical element in fertilisers.
The first step in manufacturing ammonia involves taking a hydrocarbon molecule like natural gas and splitting the “hydro” from the “carbon”: The hydrogen gets turned into ammonia for fertilizer, and the carbon gets turned into CO2, which is captured, purified, and then kept as a gas, refrigerated liquid or as dry ice for all sorts of uses.
It is for this reason that trends ammonia market can reflect those of CO2, something which Willis-Jones explored last Wednesday. Reflecting on the 2018 CO2 shortage, she explained that whilst this resulted in many headlines, it was in fact no concern to the ammonia industry.
Whilst these effects of the 2018 market are now behind us, Willis-Jones focused on today’s predictions, “In the near term, we do not expect a European squeeze on CO2 availability considering the ammonia forecast. Having said that, higher gas prices ahead and the additional merchant ammonia capacity coming on may cause some problems,” she said.
“I think it’s very worth keeping a very close eye on both ammonia and natural gas prices in the next five years. EU regulation on CO2 output will, of course, alter the ammonia production processes. We’ll see greater plant efficiency trends for green ammonia and much tighter controls on emissions, but I think this could also boost CO2 direct CO2 sales.”
Explaining such predictions, Willis-Jones looked at what is currently happening in the market, highlighting new ammonia plant developments, plant turnarounds, the natural gas market, as it works in tandem with ammonia, and recent Government policies.
With a focus on the coloration between the current liquefied natural gas (LNG) market and both ammonia and CO2, she explained, “There’s been an awful lot of capacity growth in LNG in the last few years that has slowly caught up.”
“But demand of course, non-European demand growth, has been quite depressed, especially in 2019/2020, and for that reason we have seen lower gas prices. Therefore, even though ammonia prices haven’t performed so well in the last two year, there hasn’t been any prolonged plant shutdowns and CO2 output levels have been stable.”
“Recently there’s been a lot more balance in the ammonia market, and you know this because there haven’t been as many CO2 shortages,” she said.
“We don’t foresee that there is going to be any prolonged shutdowns in the summer months like we saw in 2018, so therefore, we don’t expect a severe CO2 shortage, although that could be a little bit less available in the very immediate term.”
“CO2 is a massive deal and is becoming an even bigger deal for those of us looking at the ammonia market now because of increasing regulations. We saw in December 2020, the EU agreed that greenhouse gases needed to be cut by 50% by 2030, but apart from this just being a figure that we all agree with, we will need to be greener.”