The ammonia market is set to undergo significant growth in the coming decades, with low-carbon ammonia at the forefront of this expansion, according to a new analysis by S&P Global Commodity Insights. The report states that by 2050, low-carbon ammonia is projected to account for two-thirds of the total market, totaling 420 million tons. This growth is driven by decarbonization policies and improved economics.
Various decarbonization policies, such as the U.S. Inflation Reduction Act and the EU’s Carbon Border Adjustment Mechanism, are transforming the economic landscape of low-carbon ammonia. This transition is already underway and is expected to accelerate in the future.
The report, titled Low-carbon Ammonia: Facilitating the Transition to a Sustainable Future, highlights the potential uses of low-carbon ammonia, including its role as a marine bunker fuel, industry feedstock, and carrier for hydrogen used in power generation. This shift signifies a significant transformation for the ammonia industry, moving away from its predominance in fertilizer production and towards energy markets.
S&P Global Commodity Insights predicts a nearly tenfold increase in global trade of ammonia by 2050, reaching 160 million metric tons. Unlike the current practice of consuming ammonia on-site to produce other products, low-carbon ammonia is expected to be traded as a commodity in its own right. Major exporters are anticipated to be the Americas, the Middle East, and Australia, while Europe and East Asia will emerge as major demand centers.
The rapid growth of low-carbon ammonia will fundamentally change the market, breaking the dominance of fertilizer producers and introducing participants from carbon capture, renewables, power utility, and shipping sectors.
The report also highlights the increasing number of low-carbon ammonia projects focused on power generation, involving stakeholders such as public utilities, oil and gas majors, investment funds, and others. Furthermore, joint ventures between renewable energy producers, hydrogen producers, and ammonia producers are expected to emerge.
While decarbonization policies have provided substantial momentum for low-carbon ammonia, the report identifies several key factors that will shape the market’s composition. These include the development of certification and classification systems to harmonize international trade, clear emissions thresholds for hydrogen and ammonia in decarbonization plans, and innovation and efficiency improvements for ammonia’s use in power generation.
Although uncertainties remain regarding policies and technological advancements, the report emphasizes the transformation of low-carbon ammonia’s economics. The number of projects reaching Final Investment Decisions is expected to accelerate significantly in the coming years, both in production capacity and the necessary infrastructure.
In addition to the strategic report, S&P Global Commodity Insights has introduced a new Monthly Low-carbon Ammonia Report service. This monthly report, produced by Fertecon, provides market analysis and short-term forecasts specifically tailored to the low-carbon ammonia sector.
The future of the ammonia market is clear: it will experience substantial growth driven by low-carbon ammonia. This transition aligns with global decarbonization efforts and represents a paradigm shift for the industry. As the market diversifies and trade routes and applications expand, low-carbon ammonia is poised to revolutionize the industry.
