Overheated Investment in Low-Carbon Ammonia Needs to ＂Cool Down

Global development of low-carbon ammonia is booming, triggering an investment surge with massive capital flowing into the sector. However, a recent report from Fertecon, part of S&P Global Commodity Insights, warns that projected low-carbon ammonia capacity far exceeds demand. This imbalance could hinder project implementation and severely harm the industry.

On the demand side, Fertecon's report forecasts that overall ammonia demand will grow at an average annual rate of 2.6% over the next decade, with low-carbon applications expected to account for 19% of the total ammonia market. By 2035, low-carbon ammonia demand is projected to include 12 million tons per year as marine fuel, 6 million tons per year for power generation, and 33 million tons per year as hydrogen carrier for energy and industrial use. Fertecon predicts these new applications will continue rapid growth, reaching 38% of the total annual ammonia market—146 million tons out of 383 million tons—by 2050. On the supply side, however, Fertecon warns that 279 low-carbon ammonia projects have already been announced worldwide. If all proceed as planned without additional projects, global annual production capacity for low-carbon ammonia could reach 223 million tons by 2035 and 254 million tons by 2050—far exceeding projected demand.

In my view, such oversupply will significantly depress the market, especially given the still-high investment costs in low-carbon ammonia. Investors would struggle to recoup their investments, leading to project delays and potentially creating a vicious cycle of company losses alongside market shortages, ultimately resulting in insufficient industry investment. Fertecon also cautions in its report: "The likelihood of all announced capacities being commissioned is low," urging vigilance against potential underinvestment. While I am less pessimistic than Fertecon, I believe the low-carbon ammonia industry can find market equilibrium to meet future low-carbon demands—but this will require eliminating a significant portion of planned capacity. A nascent industry needs a healthier development environment and must avoid falling into the trap of overheated investment.