Demand for Ammonia to Strengthen
The authors are analysts of NH Investment & Securities. They can be reached at minjae.lee@nhqv.com and ys.jung@nhqv.com, respectively. -- Ed.
Ammonia is emerging as a new energy carrier for achieving carbon neutrality. Considering its: 1) high hydrogen storage density and easier liquefaction; and 2) well-established storage and distribution infrastructure, ammonia is drawing attention. Over the mid/long term, it is to be increasingly used as a fuel source for generating electricity and powering ships.
Why are so many eyes on ammonia?
Ammonia (NH3) is emerging as a new energy vector amid global efforts to reduce greenhouse gas (GHG) emissions. Ammonia is a good choice for hydrogen transportation as it boasts high hydrogen storage density and is easier to liquefy—it liquefies at -33.4℃ (versus -253℃ for liquid hydrogen). It also offers well-established storage and distribution infrastructure. While ammonia carries the weaknesses of low burning velocity, high corrosiveness, high toxicity, and nitrogen oxide generation (when burned), ammonia production and demand are forecast to rise going forward out of a need to cut GHG emissions.
Demand for ammonia to strengthen
We believe that ammonia will come to be used for a diverse range of applications. To date, roughly 80% of global ammonia is accounted for by fertilizer manufacturers. But, moving ahead, ammonia should come to be more used as a fuel: 1) for co-firing purposes at coal and gas-fired power plants; and 2) for powering ships. In the process, ammonia is to help reduce GHG emissions by lowering the use of fossil fuels.
Co-firing of ammonia and coal at coal power plants will not require large-scale infrastructure changes. The Korean government is aiming to burn 20% ammonia at four coal-fired power plants by 2027 and at 24 coal-fired power plants by 2030. This plan is to require ammonia of at least 10mn tons, a level 6x higher than the current domestic ammonia circulation of 1.5mn tons. Similar ammonia-related projects are to be underway in Japan and Saudi Arabia, as well.
According to the IEA, ammonia should come to represent more than 50% of global shipping fuels by 2050. Along with MAN, an engine manufacturer, SHI is targeting to complete development of ammonia-powered vessels by 2025. Wartsila is also carrying out R&D on ammonia-powered engines. Down the road, we believe that a fuel-flexible, two-stroke ammonia engine that can also use fossil fuels will emerge as a promising alternative vessel engine
Making investment in ammonia capacity expansion to be critical
Ammonia is produced via the Haber-Bosch process, which converts hydrogen and nitrogen to ammonia. Renewable energy could: 1) power the electrolyzer which produces hydrogen; 2) separate nitrogen from the air; and 3) provide power to ammonia generation facilities.
Saudi Arabia’s NEOM mega-project plans include the construction of a green ammonia plant. Saudi Aramco, Samsung Engineering, and Lotte Fine Chem are now preparing a large-scale ammonia production project. Going forward, we foresee that it will become increasingly important to secure economically-feasible ammonia production facilities that are capable of coping with the anticipated mid/long-term demand growth for ammonia.