Natural Gas Sets the Global Floor
Ammonia production is approximately 80% natural gas-based (steam methane reforming). Gas accounts for 70-80% of production cost. Regional gas prices create a wide cost range: Middle East $0.50-1.50/MMBtu, US $1.50-2.50/MMBtu, Europe $8-12/MMBtu (FACT: IFA/Fertilizer Week, 2026).
The cost curve creates a wide price band. Middle Eastern ammonia can be profitable at $200-250/t, while European ammonia requires $600-800/t. European production has fallen 30% since 2021 as high gas prices made imports cheaper (FACT: Fertilizers Europe, 2026).
The Hormuz Shock
Approximately 21% of global traded ammonia was removed from the market by the Strait of Hormuz disruption in March 2026, affecting Saudi Arabia, Qatar, UAE, and Iranian exports (FACT: ICIS, March 2026). Prices surged and have remained elevated.
Traders shifted to US Gulf Coast and Trinidad ammonia, but logistics constraints limited the replacement. ICIS expects prices to stay elevated through H2 2026 and ease from January 2027 as supply normalizes (FACT: ICIS, April 2026).
Blue and Green Ammonia: The Energy Transition Wild Card
Blue ammonia (natural gas with CCS) and green ammonia (renewable hydrogen-based) are attracting significant investment. Over 10 Mt of new low-carbon ammonia capacity is planned by 2030 across Australia, the Middle East, the US Gulf Coast, and Chile (FACT: IEA, 2025).
Japan and South Korea are developing ammonia co-firing in coal power plants as a decarbonization strategy. This could add 5-10 Mt of new ammonia demand by 2030, entirely for energy, not fertilizer.
Procurement teams purchasing ammonia in 2026 should prioritize supplier diversification, lock in annual volumes where possible, and monitor the shifting trade policy landscape.