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2024

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OPINION | What the global trade in hydrogen-derived clean ammonia and methanol will look like in the coming years

Author:

Hydrogeninsight


 

Demand for clean shipping fuels will supercharge these sectors, writes analyst Stuart Nicoll

 

Until very recently, ammonia was little more than a feedstock for fertilisers, and methanol just a building block for selected industrial chemicals.

 

Now both of these hydrogen derivatives are at the heart of the energy transition, with the green and blue varieties touted as future clean fuels for the massive global shipping industry, and perhaps the power sector too.

 

And with the cost of transporting ammonia and methanol halfway around the world expected to be in the region of only $50-75 per tonne, a new global market is shaping up that will dwarf the existing trade in the highly polluting grey versions of these chemicals and require hundreds of new ocean-going carrier vessels.

 

The nascent ammonia industry is anticipated to achieve clean exports in the region of 34 million tonnes (Mt) by 2030, and a sizable 311Mt by 2050.

 

 

 

For the period 2026-32, we expect blue ammonia to win out over green, aided by the implementation of Europe’s Carbon Border Adjustment Mechanism (CBAM), which will see low-carbon exports to Europe become competitive against carbon-intensive alternatives.

 

As such, we anticipate Europe to emerge as a key import centre for blue ammonia alongside Japan and South Korea, demanding 15Mt and 5.0Mt each in 2030. In the same period, three regions are set to dominate exports: North America, Europe, and Australia, which together have the potential to supply the market with 22Mt of blue ammonia.

 

As green financing expands, we expect the blue ammonia trade to slow towards the end of the next decade. While still in its early stages, the green ammonia industry is expanding swiftly, and our modelling shows exports are poised to reach 12Mt in 2030.

 

Latin America and Africa are set to emerge as major exporting regions, with Europe, Japan and South Korea the primary centres of demand. To transport the projected 34Mt of clean ammonia by 2030 the equivalent of approximately 21 very large gas carriers (VLGCs) or very large ammonia carriers (VLACs) will be required.

 

Our modelling indicates a surge in green ammonia seaborne trade from 2030 to 2050, driven by the Middle East and South Asia.

 

By 2050, these two regions are positioned to supply the market with over 78Mt of green ammonia, accounting for just under one third of exports.

 

As we look to 2050, the expanding network of clean ammonia trade routes, backed by rising capacity and bilateral trade agreements, are set to fundamentally transform the landscape of ammonia exports. Our modelling highlights three trade flows at the centre of blue ammonia; Intra-European, North America to Europe, and North America to Japan/South Korea.

 

Latin America will account for the lion’s share of green ammonia exports by 2050, with 98MTt supplying top importers, Europe and Northeast Asia, with 38Mt and 14Mt, respectively.

 

Under these new global trade flows, the number of VLGC/VLAC equivalents required for clean ammonia rises to 386 by 2050, requiring substantial investments in newbuilds and retrofitting LPG [liquid petroleum gas] vessels for ammonia storage.

 

Production of clean methanol is also ramping up, driven by uptake agreements for its use as a marine fuel and chemical feedstock, and its role in the hydrogen economy.

 

While sharing similar drivers, clean methanol trade is forecast to be significantly lower than that of ammonia, with 2030 seeing 16Mt of product traded. By 2050 global clean methanol trade is expected to rise to 100Mt — equivalent to one third of the amount of clean ammonia trade.

 

Nevertheless, there will be a continuous, gradual expansion of the requirement for methanol-capable chemical tankers. We expect 33 medium-size methanol carriers (able to carry 50,000 tonnes) will be required to transport 16Mt of trade by 2030; our modelling suggests a total of 180 medium-sized methanol carriers could be required by 2050 to ship the expected 100Mt of clean methanol trade.

 

Blue methanol exports trail green, hitting 6.7Mt by 2030 and 19Mt by 2050. Leading exporters of carbon-intensive methanol — the Middle East and Southeast Asia — will buck this trend, with blue exports outpacing green until the mid-2030s.

 

Existing tax credits for carbon capture projects, alongside the low cost of natural gas in North America, make blue methanol the most viable option until the end of the 2030s.

 

By 2050, the Middle East and Southeast Asia have the potential to supply the global markets with 6.3Mt of blue methanol.

 

Europe and Northeast Asia (Japan and South Korea) will also prevail as the leading importers of blue methanol by 2030.

 

A shift to seven major importers is seen by 2050, though the largest importers will remain in Europe, North America, and Northeast Asia, requiring a total of 15Mt of blue methanol by 2050. The three largest trade routes for blue methanol by 2050 are set to be Intra-European at 4.4Mt, Intra-North American at 2.3Mt, and North America to Northeast Asia at 1.6Mt.

 

Despite our model showing a relatively slow start for green methanol trade, incremental growth is expected year-on-year from 2026. We expect exports of green methanol to be around 8.9Mt, equivalent to 23% of the projected grey methanol trade by 2030.

 

Oceania is expected to dominate the green methanol market by 2030, alongside existing exporters North America and the Middle East, together accounting for 5.7Mt in trade. On the other side, only three regions will likely require more than 1Mt imports by 2030 – Europe, Northeast Asia, and North America. Our 2050 outlook highlights later entrants in South and Southeast Asia, driving global exports to 81Mt. South Asia, Southeast Asia, and China will emerge as additional import centres.

 

As for green methanol, uneven adoption of renewable energy capacity — coupled with the need for increased use of clean methanol for sustainable aviation fuel (SAF) under the ReFuelEU Aviation Regulation — sees Europe cement its place as the leading importer. Europe will secure the bulk of its requirements domestically (6.0Mt by 2050). However, a potential supply of 5.9Mt from Australia and 4.4Mt from the Middle East will help Europe meet its green methanol requirements.

 

In conclusion, the ammonia trade is likely to be transformed over the next 25 years. By 2050, clean ammonia could provide demand for close to 400 VLGCs, compared to a current fleet of 375 that is focused on carrying LPG.

 

In contrast, though a requirement for 180 methanol carriers will be significant, it compares to an aggregate medium-sized methanol-capable fleet of 277 medium-sized vessels at the end of 2023.

 

Source:Hydrogeninsight

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