Section: CRUNS Comment

While there has been a lot of talk about decarbonising ammonia and methanol production, for as long as blue and green production is more expensive than conventional production, uptake will be dependent upon markets which are prepared to pay a premium for such chemicals, perhaps because they have no other reasonable choice, given environmental mandates. One sector above all has dominated the prospects for medium term demand for low carbon ammonia and methanol alike, and that is shipping.

Nitrogen magazine, as it originally began life in It has been a tough few years for the European nitrogen industry, and between covid, gas price spikes and Russian sanctions, not all companies have weathered the storm. Now that the initial shock of the sky-high ammonia prices that the closure of the Black Sea and the cutting off of almost 40% of Europe’s gas supplies has passed, and the world gas and ammonia markets have largely adjusted to the new reality, prices are coming back down. But it seems that in its wake it may leave quite a different European nitrogen industry from the one that existed in 2019.

We are very pleased to be able to tell you that, as of this issue, Nitrogen+Syngas magazine has a new publisher. Or rather, an old publisher, as the magazine is now once again part of the CRU Group.

While the world’s attention has been grabbed by the terrible situation in the Middle East, the Russian-Ukrainian conflict continues to drag on. Of particular concern in recent months has been the deal to allow export of grain from Odessa, which lapsed in July 2023, a year after it first began. The deal had allowed 33 million tonnes of grain to be exported, around 60% of it to the developing world. However, Russia had always insisted that continuing with the deal was contingent on (a) a resumption of Russian ammonia exports via Odessa and (b) removing SWIFT payment restrictions on the Rosselkhozbank agricultural bank, allowing easier export of fertilizer. Fertilizers remain exempt from sanctions on Russia, but the difficulty in securing payment, the closure of the ammonia pipeline to the Black Sea, and high maritime insurance rates for traversing the Black Sea have made exports much more difficult. And although Ukraine continues to export grain, now mostly via rail to ports like Ismail and Reni on the River Danube, Russia has done its best to disrupt this, striking ports and warehouses and laying mines in shipping lanes. Around 300,000 tonnes of grain has been destroyed, according to Ukraine, as well as up to three ships hit by mines and one possibly by a missile on November 8th. Furthermore, bottlenecks in rail transit and port capacity and the difficulty in getting ships to the ports mean that actual volumes of grain exported are considerably reduced, with only around 700,000 tonnes exported via the Danube Ports from August to the start of November.

The closure of CF Industries’ ammonia plant at Billingham, Teesside (see Industry News, page 8) marks the end of a long era for UK fertilizer manufacture. The facility was the last operating ammonia plant in the country, following CF’s decision to permanently close its site at Ince in Cheshire in June last year. Going forward, Billingham will now rely on imported ammonia as a feedstock to run the nitric acid and 625,000 t/a ammonium nitrate plants on the site.

While demand for ammonia remains – for now at least – strongly tied to fertilizer and farming, over the three decades that I’ve edited this publication, methanol’s story has been a very different one, with a succession of major new slices of demand coming every few years from new applications that flare up and then mature or even drop away again. For a while in the 1990s it was MTBE, the oxygenated fuel additive that had a brief flourish in the US before being shut down by leaking fuel tanks leaching into ground water. Then there was dimethyl ether (DME) as a blendstock for LPG, and methanol itself directly blended into gasoline in China to keep up with soaring vehicle fuel demand. More recently, methanol to olefins (MTO) has added almost another 25% of demand over and above existing chemical and fuel uses. But as the world cracks down on coal production and use, China’s attempt to use methanol as a way of using domestic coal to replace imported oil seems to have passed its high water mark and begun to recede.

Last year, in the wake of Russia’s invasion of Ukraine and the associated disruption to fertilizer and grain exports from both countries, there were dire predictions of the impact upon global food supply. That the worst of these predictions have not so far come to pass is in no small part due to the deal brokered by the United Nations and Turkey in July 2022 to allow exports of grain and fertilizers from Black Sea ports. According to the UN, since last July, some 29.5 million tonnes of grain and foodstuffs have been exported from Ukraine via the Black Sea, including nearly 600,000 tonnes in World Food Programme vessels for aid operations in Afghanistan Ethiopia, Kenya, Somalia and Yemen. Before the war, Ukrainian grain fed the equivalent of up to 400 million people worldwide, and the deal ensured that Ukrainian grain exports ‘only’ fell by 5 million t/a over the past year.

On March 20th this year, just as this issue was going to print, the UN Intergovernmental Panel on Climate Change (IPCC) issued its Synthesis Report, one of its 5-7 yearly comprehensive assessments of how the world’s climate is changing and what needs to be done to ameliorate it. In spite of all of the progress that has been made since the 5th Synthesis Report in 2017, the IPCC notes that: “the pace and scale of what has been done so far, and current plans, are insufficient to tackle climate change.” While the body believes that keeping warming to 1.5°C above pre-industrial levels is still possible, it is not likely unless work to decarbonise proceeds more rapidly. In particular, the IPCC suggests that CO2 and equivalent emissions need to fall by 43% by 2030 compared with 2019 values, and 60% by 2035 to achieve this goal.

The past year has been a difficult, even disastrous one for Europe’s fertilizer producers. High natural gas prices have kept plants shuttered, with 70% of the continent’s ammonia production shut down at times. It remains uncertain how much of this will return to production this year, or indeed ever.

Fertilizers are always political to some extent, sitting as they do at the intersection of key commodities such as oil and gas on the one hand and food on the other. Markets for major nitrogen derivatives have often been distorted by political decisions to achieve self-sufficiency in fertilizer production, such as in, e.g. China or India. But over the past couple of months ammonia has found itself particularly in the political spotlight, in the context of the ongoing conflict in Ukraine, which continues to shape and indeed re-shape global commodity markets.