The deal brokered by Freight Investor Services (FIS) paves the way for hedging based on the supply and demand dynamics of the ammonia market in Europe; Building block for future blue and green ammonia trading
London, 21 April 2023
Global energy and commodity price reporting agency Argus announced that the first-ever futures ICE Ammonia Outright – Argus Ammonia NWE CFR Future contract has traded between counterparties in a deal brokered by Freight Investor Services (FIS). The 500-tonne futures contract was traded at $385/t for May delivery and cleared through ICE.
Ammonia has historically been used as a feedstock for the global fertilizer industry, but its potential as a clean fuel of the future could see its importance grow as the world experiments with more sustainable energy sources. There is interest from both power generation and marine fuels markets, both of whom see potential in low-carbon ammonia as an energy source.
The first step in this process is trading ammonia futures based on the current market, which enables an ammonia forward curve to be developed that will provide the basis for more sustainable low-carbon ammonia investment decisions. Grey ammonia futures can act as a base contract to price future blue and green ammonia trading, or as a basis to wherever that green or blue ammonia is geographically located.
CEO of FIS, John Banaszkiewicz, said: “This is an important trade for many sectors, beyond shipping and fertilizers. ICE’s ammonia contract will be a cornerstone of price discovery and risk management as ammonia is unquestionably one of the most important fuels in our energy transition to a cleaner future. We are delighted to play our small part in helping this market develop."
Jeff Barbuto, Global Head of Oil Markets at ICE, said: “Ammonia’s potential as an alternative fuel source continues to develop as new technologies and markets evolve. We’re excited to work with our customers to further build out the market and this contract alongside ICE’s vast suite of energy derivatives and risk management tools.”
Adrian Binks, Chairman and Chief Executive of Argus, added: “This first transaction is a significant step towards the emergence of a new futures market for ammonia in Europe, which allows market participants to hedge physical price risk. Uncertainty within the power generation and shipping sectors over the cost associated with switching to blue or green ammonia, in addition to demand for ammonia in traditional markets such as fertilizers, has driven interest in developing a risk management tool as the market continues its evolution.”
Argus has expanded its suite of ammonia prices with the recent launch of Carbon-Adjusted Price of Ammonia (CAPA) assessments that reflect the future impact of the Carbon Border Adjustment Mechanism (CBAM) on European ammonia prices, to further improve transparency in this nascent clean market for participants.
Argus does not sponsor, endorse, promote or sell third-party contracts or financial products.