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(Bloomberg) -- Major ammonia producer Yara International ASA said it’s ready to potentially expand output if global talks to decarbonize shipping raise demand for the carbon-free chemical.
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Shipping’s global regulator is due to hold a meeting next month to develop long-term rules to force the maritime sector to slash its greenhouse gas emissions. Depending on how those and subsequent talks progress, shippers may have to start replacing mainly oil-derived fuels with cleaner alternatives such as ammonia, potentially creating a big new market for suppliers like Yara.
“When the incentives are there, we’re ready to scale up,” Yara Chief Executive Officer Svein Tore Holsether said in an interview. He cautioned that there needs to be a solid business case to do it, so regulation will play an “important role.”
Still, clean ammonia is a long way from being able to compete with oil as a ship fuel. Standard oil-derived propellant in Rotterdam averaged about $535 a ton last month, whereas green ammonia — a low-emission version of the chemical — was at $925 in northwest Europe, according to S&P Global Commodity Insights. And because ammonia is less energy dense, vessels would need more, further widening the cost gap.
A major shipping trade group and dozens of countries have previously supported a proposal for a pricing mechanism for greenhouse gas emissions, something that could help narrow clean ammonia’s cost gap to oil.
But reaching an agreement on emission-cutting rules at the International Maritime Organization — the regulator that has 176 member states — won’t be easy. There are also concerns about ammonia’s high toxicity, though that hasn’t stopped mining giant Fortescue Ltd. developing a vessel that can use the fuel.
“We’re serving several markets today, and one potential big one is maritime fuel,” Holsether said.
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