Ammonia-to-Hydrogen Assessment Surges In Europe

The ammonia-to-hydrogen assessment in Northwest Europe has experienced a remarkable surge, reaching a five-month high at €4.64/kg. The consistent upward trajectory observed over eight consecutive weeks, resulting in a €0.10/kg increase makes this development particularly noteworthy. This surge stands in stark contrast to mid-July 2023 when the assessment was €0.80/kg lower. This recent climb underscores the resilience of ammonia pricing in the region.

Let’s delve into the latest ammonia and hydrogen pricing trends and shed light on the factors driving these markets.

Diverse Pricing

While the ammonia-to-hydrogen assessment continues its bullish trend, different hydrogen forms are exhibiting diverse pricing movements. Low carbon hydrogen, produced through steam methane reforming (SMR) with carbon capture and storage (CCS), has seen its value rise by €0.08/kg, now standing at €3.13/kg. In contrast, baseload electrolysis, a method for hydrogen production, has faced a substantial €0.40/kg drop. This drop brings its price below the €6/kg mark for the first time since early August 2023, settling at €5.99/kg. These varying trends reflect the dynamic nature of the hydrogen market in Northwest Europe.

Influencing Factors

The ammonia market plays a pivotal role in the energy sector, and recent pricing trends indicate stability in early September 2023. Demand resurgence from global regions and production cuts have contributed to the steady prices. In Asia, inquiries for spot cargoes have surged, yet availability remains limited. Fertilizer demand remains robust, but the chemicals sector is experiencing weaker demand. Notably, the ammonia production sector anticipates a recovery, as scheduled maintenance in Saudi Arabia is set to conclude in mid-September. Additionally, Trinidad has restored gas supply to ammonia production facilities, further contributing to the revival of the ammonia market.

Gas Market Dynamics

The Dutch TTF October ’23 contract initially encountered bearish sentiment in early September. This sentiment stemmed from developments in Australia, where potential strikes at LNG export facilities raised concerns. While Australian LNG primarily caters to the Asian market, any disruptions in Asian LNG deliveries could lead to a redirection of LNG vessels away from Europe. 

Such a shift could significantly impact European energy pricing. Consequently, the October TTF contract witnessed a drop, hovering just above the €30/MWh threshold. However, later in the week, renewed concerns regarding potential strikes caused the contract’s price to rebound, reaching approximately €35/MWh. These fluctuations underscore the gas market’s sensitivity to global events.

OFB’s Insight

The energy market in Northwest Europe is characterized by dynamic pricing trends across ammonia, hydrogen, and natural gas. The sustained upward trajectory of the ammonia-to-hydrogen assessment reflects the evolving energy landscape. Meanwhile, the gas market remains highly responsive to global developments, underscoring the intricate interconnectedness of energy markets on a global scale.