Ammonium nitrate and its derivatives

AMMONIUM NITRATE

Ammonium nitrate and its derivatives

Demand for nitrates has rebounded after a difficult period following the dislocations caused by the war in Ukraine, with UAN in particular seeing rapid growth. Technical ammonium nitrate is also growing on the back of increased mining activity.

Ammonium nitrate and its various derivatives; calcium ammonium nitrate (CAN) and urea ammonium nitrate (UAN) remain collectively the second largest nitrogen fertilizer sector by use after urea. While urea has often been preferred in warmer climates because it contains a higher percentage of nitrogen (ca 46% compared to an average of 33% for AN), and hence is a cheaper and more efficient way of transporting nitrogen nutrient, ammonium nitrate remains preferred in some key markets, particularly Europe, Canada and Russia, because it does not need to be hydrolysed to the nitrate form in the soil and hence is available for more rapid uptake by plants; important for shorter growing seasons in more northerly lattitudes. Ammonium nitrate generates 90% fewer ammonia emissions per unit of nitrogen than urea, which is a factor in many countries which are trying to reduce ammonia emissions, especially in Europe.

Manufacture

Ammonium nitrate is produced by the acid base neutralisation reaction of nitric acid with ammonia. As nitric acid is also made from ammonia oxidation, AN plants are typically co-located with ammonia and nitric acid production. The ammonium nitrate is formed as a solution in water. For production of solid AN it is then typically concentrated in an evapourator or concentrator to a solution strength of 95-99% AN at high temperature (ca 150C). This AN ‘melt’ is then passed to a prill tower or granulator to produce the solid AN prills.

Orica’s ammonium nitrate plant at Kooragang Island, Newcastle, Australia.

PHOTO: ORICA

Prill density can be varied by using different concentrations of ammonium nitrate melt. Low density prills, at a density of around 1.29, are formed from 95-97.5% AN melt, while high density prills, at a density of around 1.65, are formed from a 99.5-99.8% melt. Low density prills are more porous than high density prills and so absorb e.g. oil more easily. For this reason low density prills are used for making blasting agents – this is known as ‘technical’ or ‘industrial’ grade AN (TAN/IGAN). The higher density prills are used as fertilizers (fertilizer grade AN or FGAN), with a typical nitrogen nutrient content of 33-34%. Because of the similarity in IGAN and FGAN production, both from an ammonium nitrate liquor, the TAN industry originally evolved largely as an ‘adjunct’ to the production of FGAN. However, because of regulatory hurdles in storage and transport of AN, plants tend to be relatively close to areas of end user demand, and as fertilizer and mining areas are often not the same, there has been a gradual polarisation of the industry into dedicated facilities producing one or the other.

The melt can also be mixed with other chemicals to produce other end products. One popular method is to mix the melt 75-25% with calcium carbonate (limestone) to produce calcium ammonium nitrate (CAN). Dolomite (calcium magnesium carbonate) can be substituted for calcium carbonate to produce magnesium ammonium carbonate (MAN).

Finally, the non-concentrated ammonium nitrate solution direct from the reactor can instead be mixed with a solution of urea to produce a solution called urea ammonium nitrate (UAN). UAN is typically available in three different concentrations: 28%, 30% and 32% nitrogen. The most popular form – 32% nitrogen – is a mixture of 45% ammonium nitrate, 35% urea and 20% water. Ammonia and nitric acid are used to adjust solution pH to close to 7

Since ammonium nitrate is hygroscopic in its solid form it is usually coated with an anti-caking compound.

Safety and security

Major incidents involving AN continue to occur. Often this is not explosive or technical grade AN, which tends to be more tightly monitored by authorities, but rather FGAN which has been improperly or dangerously stored. Explosions in the ports of Beirut and Tianjin (2015) and at West, Texas (2014?) were caused by stockpiles of FGAN, likewise explosions at manufacturing sites like Toulouse (2001) or Port Neal (1994?). Some countries have banned the sale of AN as a fertilizer, or introduced restrictions on how much can be stored or imported, although this often just leads to substitution into forms perceived as less dangerous such as CAN, UAN or NPK blends. However, the general utility of AN as a fertilizer means that it continues to be widely used.

Fertilizer demand

Fertilizer demand for nitrates is split between FGAN, CAN and UAN. Global demand for FGAN was 17.3 million tonnes product in 2023, for CAN this was 13.5 million tonnes product, and for UAN 24.2 million tonnes product. Demand for FGAN, CAN and UAN is concentrated in three main regions: Western Europe, North America, and Eastern Europe/Russia, which collectively account for two thirds of all consumption. However, each is quite different in terms of how that AN is used. In Western Europe, restrictions on the sale of straight AN fertilizer in countries such as Turkey, Germany, Ireland and parts of the UK due to its potential for misuse has led to substitution with calcium ammonium nitrate (CAN). Western Europe, including Turkey, is the only significant market for CAN, and is responsible for three quarters of all global CAN demand.

In the US, conversely, a preference for fertilizer solutions but a corresponding tightening of regulations on the storage, transport and use of ammonia for direct application, on grounds of safety and security, has led to a rapid increase in demand for UAN solutions, and the North American market is heavily skewed towards UAN, with straight AN mostly used as a mining explosive.

Consumption in Eastern Europe and Russia has been rising rapidly. Russian consumption of AN has more than tripled since 2000. CAN and UAN are not major features of this market. The rise in domestic consumption in Russia has helped alleviate one issue that had bedevilled the global AN market – allegations of so-called ‘dumping’, or sale of product at below cost price in order to increase market share. However, Russia remains a major exporter of FGAN and the war in Ukraine has complicated this considerably.

Outside of these regions, UAN use is also rising rapidly in Australia and Argentina.

Ukraine

Russia’s invasion of Ukraine caused dislocations for the AN and downstream industries in particular. Although fertilizer has not been subject to sanctions, financial restrictions have made paying for fertilizer from Russia and Belarus much more complicated. Russia also placed quotas on exports of AN and other fertilizers in order to make sure that it had enough for the domestic market. Furthermore, the gradual shutdown of Russian natural gas exports to Europe over the course of 2022 added to what had already been a shortage of gas in Europe and led to record high gas prices which forced the shutdown of most (up to 65%) of Europe’s domestic ammonia capacity. This in turn led to very high prices for AN, and consequently farmers reducing consumption considerably. European nitrate production dropped from 25.1 million tonnes in 2021 to 19.4 million tonnes in 2022.

Gas use curtailments, and a rapid expansion of LNG imports into the continent have brought that situation under control over the past two years, however, and gas prices are now back down to normal levels and much European nitrogen capacity has reopened. European nitrate production is expected to have recovered to 21.9 million tonnes in 2024. Russian FGAN exports likewise dropped by 50% in 2022 to just 1.5 million t/a, but are expected to have recovered to 2.2 million t/a in 2024. The destination of Russian exports has seen a wholesale shift, with only 15% of FGAN going to Europe in 2023, and 60% going to Brazil and Latin America.

Consumption increasing

Grain production in the US plays a crucial role in determining nitrates affordability and usage. US wheat output is expected to rise this year following an expanded spring planting area, supporting nitrate consumption in the region. Increasing wealth in developing nations is boosting consumption, and higher demand for agricultural commodities due to the global energy transition has increased use of crops as feedstock for energy products, with nearly 40% of US corn being used for ethanol and nearly 50% of US soybeans being used for biofuel. Furthermore, nitrates have become more affordable, particularly in Europe, as fertilizer prices have fallen from their 2022 peak. Global nitrogen consumption is projected to increase by 1.8% year on year in 2024, with significant increases in Indonesia, Turkey, Argentina, and Brazil and in spite of an 18% decline in Ukraine and some demand reduction in China due to more efficient fertilizer use.

For nitrates, FGAN consumption in East Europe/Russia is expected to recover by 2028, reaching 5.3 million t/a following a demand destruction as an aftermath of the Russia-Ukraine conflict. In 2024, Russian nitrogen fertilizer consumption is expected to remain at a similar level to 2023, but it is expected to grow by about 2.5% per year out to 2028, as new by new domestic FGAN capacity comes on-stream.

CAN usage remains concentrated in Europe and Turkey with a healthy increase projected in the medium term, driven by demand in Eastern Europe, where the fertilizer is favoured for its perceived environmental sustainability. Eastern European CAN consumption is expected to increase by 22% by 2028, led by Estonia, Hungary and Poland. Demand for CAN is also rising in Brazil and Argentina.

UAN consumption remained relatively stable in 2023 but is expected to grow in the medium term, reaching 27 million t/a by 2028. In 2024, consumption in France and the US is anticipated to increase by 8.2% and 5.3% respectively. Demand in the US is bolstered by enhanced application rates following a record corn harvest in the 2023–2024 crop year.

Production

More stable gas prices are leading to increases in European nitrate production. CAN, UAN and FGAN production in Europe is expected to increase by 5.2%, 13.5% and 4.2% respectively, in 2024. Over the next few years production will continue to climb, though it is not expected to reach the level of its 2021 pre-invasion peak (22.1 million t/a) until 2028.

US production is relatively stable, at around 13.7 million ta of UAN, and operating rates are already at 90%, supported by low gas prices and good demand, leaving not much room for expansion.

Thanks to its abundant gas reserves, Russia remains a low cost producer. While the Ukraine war has reduced its opportunities for exporting to Europe, it has gradually made up for that by expanding sales into Latin America. Russia is anticipated to produce approximately 11.5 million t/a of nitrate fertilizers in 2024, giving it a 42% share of the FGAN market. FGAN production is expected to increase to 8.2 million t/a by 2028, following the commissioning of new plants in 2026 Q4, primarily aimed at satisfying the export markets, particularly South America.

New production over the next few years is concentrated in Eastern Europe, Egypt and Russia/Central Asia, as shown in Table 1, although some of the larger projects are more speculative, and firm new capacity is only 2.2 million t/a in total out to 2028. Overall this is likely to lead to improved operating rates and higher prices over the medium term.

Trade

US UAN exports to Europe increased in 2023 as European production went through a downturn in 2022 because of shutdowns in European capacity following the gas shortage and high feedstock prices. Since then, European nitrate production has rebounded with many plants resuming operations and June 2024 curtailments remained low at 18%. Improving European production has reduced export opportunities to the region because of lower netbacks. As a result, 2024 Q2 US exports were 23.3% lower than the same period last year. Instead, US exports have found a new home in Australia and Argentina as both regions have seen a healthy increase in UAN demand. US exports are expected to slightly decrease by 2026 and stabilise thereafter in the medium-term as domestic demand increases.

Russia and Trinidad have been steadily increasing supply to the US with total 2024 Q2 imports around 28% higher than the same period last year. Other Russian UAN exports are primarily directed to France and Australia. Russian UAN exports rose 15% in 2023 compared to 2022 and are expected to remain fairly stable until 2027 before reaching 2.1 million t/a in 2028 when the new Ammonii Mendeleevsk plant is predicted to commission. Brazil is the largest consumer of Russian FGAN. With crops like sugarcane, corn and coffee requiring significant amounts of nitrogen fertilizers and growing plantation area. The region is highly dependent on imported fertilizer due to the lack of domestic production capabilities and Russia’s cost position enables it to export competitively priced FGAN to the region.

Technical AN

In addition to the various fertilizer nitrates, AN remains the main component of the most widely used commercial explosives. Low density or technical grade AN (TAN) demand reached 17 million t/a worldwide in 2023, making it around one quarter of all demand for ammonium nitrate. TAN demand is driven almost exclusively by mining uses, with coal, iron ore, copper and gold mining collectively representing the lion’s share (70%) of demand. Coal is the most important of these, and coal production globally is reaching a peak at present, and is likely to decline over the next few years as power production switches to lower carbon generation, particularly in the US and China. Indian consumption will rise, but not enough to counteract an overall fall. Conversely, iron and copper demand is increasing, and new copper mines in Chile, Peru and the US will lead to more TAN demand. Additional iron ore production is expected in Australia, Ukraine and Brazil. Gold mining is forecast to fall over the next few years, reducing TAN demand by about 200,000 t/a. Overall, TAN demand will rise modestly, to about 17.5 million t/a in 2028.

TAN production tends to be closer to the mine sites, as restrictions on shipping and storage of explosive precursors like TAN tend to be quite stringent. Production is concentrated in Russia, China, the US and Australia, but India’s growing appetite for coal is leading to new TAN capacity being built there, with Deepak bringing new capacity on-stream at Taloja and Gopalpur this year and Chambal at Gadepan in 2025, totalling 1.0 million t/a of new TAN capacity, bringing TAN production to a potential 18.1 million t/a by 2028.

Green production

In Europe, nitrogen fertilizer prices could rise over the next decade as a result of EU targets on ammonia producers, with significant implications for fertilizer affordability. The cost of fertilizer grade ammonium nitrate (FGAN), which is driven by the cost of ammonia, could rise to as much as ~$1,500/t N in real terms in 2030 if produced with green ammonia in line with EU policy obligations. The same product was selling for as low as ~$800 /t N in 2020 when produced with conventional ‘grey’ ammonia. If using the lowest cost form of imported green ammonia from the USA, the cost of FGAN would be roughly half, at ~$800 /t N in 2030. A similar cost would also be achieved using blue ammonia from the USA.