Published July 2017
Ammonia is the basic building block of the world nitrogen industry; consumption of ammonia for nitrogen fertilizer accounts for more than 80% of the world ammonia market. Nitrogen fertilizers are the most widely used fertilizers in the world, accounting for close to 60% of all fertilizers. With the exception of China, where much of the ammonia is produced from coal gasification, most of the world’s ammonia is produced from natural gas.
The following pie chart shows world consumption of ammonia:
Ammonia is generally processed into downstream fertilizer products before being applied to the soil. These products include urea, ammonium nitrates, ammonium sulfate, ammonium phosphates, and nitrogen solutions. Consumption of ammonia in industrial applications is projected to grow slightly faster than fertilizer use during the forecast period. Ammonia is used to produce ammonium nitrates that are used to make explosives. (Covered in the CEH Explosives and Blasting Agents report.) It is also used in the production of acrylonitrile for acrylic fibers and plastics, hexamethylenediamine for nylon 66, caprolactam for nylon 6, isocyanates for polyurethanes and hydrazine, and various amines and nitriles.
The global ammonia market has been steady for the past two years as there have been minimal constraints associated with feedstock natural gas availability in key producing regions. China experienced a sharp rise in coal prices and faced steeper competition in its urea export market, resulting in a drastic decline in ammonia production in 2016 compared with 2015. However, production in the Middle East and the United States increased correspondingly, with only a minor loss in total global production.
Currently, the world is experiencing weaker nutrient demand as a result of poor economic prospects, lower crop and food prices, increasing competition, and fluctuating energy prices. A reduction in fertilizer prices has had a significant impact on fertilizer producers’ earning potential. Although there have been capacity curtailments, consolidation announcements, and cost-cutting measures, fertilizer production and import levels have remained healthy.
The shares of feedstocks such as naphtha and fuel oil are declining; natural gas is the preferred raw material for newer ammonia plants. During the forecast period, 97% of the planned ammonia capacity increases will be based on natural gas. However, ammonia plants are expensive; investment costs can exceed $1 billion and plants can take up to three years to build.
During 2011–16, world apparent consumption of ammonia increased at about 2% per year; growth is forecast to slow to about 1.8% annually during 2016–21. The global ammonia supply/demand balance is expected to move toward a surplus, as future capacity additions will continue to outpace consumption, leading to declining utilization rates. Ammonia capacity is increasing primarily in areas where the availability and cost of natural gas are lower, in particular the United States and the Middle East.