Spot Market in Ammonia Bunker Fuel Possible, Says Yara Executive

Slide from Yara Clean Ammonia presentation in London last month. Image Credit / S&B
 

Yara might not be a familiar name in the bunker industry but that might change if Murali Srinivasan of Yara Clean Ammonia has his way.

Yara is one of the biggest suppliers and distributors of ammonia in the world and Srinivasan heads up its marine fuels department formed two years ago.

While ammonia's presence in the shipping space is tiny, it has established itself as one to watch as shipping's energy transition gathers momentum. And Srinivasan is in no doubt that Yara could play a significant role as a marine fuel company in the years ahead.

"Our long-term ambition is to be one of the leading fuel suppliers in the market," the executive told Ship & Bunker at a shipping event in London last month.

The extent of its ambition rests on its production capacity and global distribution network: Yara is one of the biggest producers and distributors of ammonia globally.

But if bunkering is about to become a multi-fuel market with new players and new products, how will that market take shape?

When the global bunker industry emerged after the oil price shock of the early seventies, the oil majors took a back seat. Price volatility had arrived and with it came a swathe of independent players.

As bunker oil is a global commodity, could the same happen for ammonia and the other, alternative marine fuels?

Srinivasan thinks so but has a number of caveats related to the particular context of ammonia's global fundamentals.

"A market similar to the one that exists in oil and refined products could develop," he said.

But it might take time before it gains traction?  "That would depend on how demand picks up." 

Ammonia is a process industry which means that suppliers cannot guarantee supplies to traders. Unless the market takes off and becomes pretty big, the supply/demand situation in shipping could be met by the existing value chain.

What might the ammonia market as bunker fuel look like in the early stages? Would it be contract or spot?

Initially, it will be a contract, Srinivasan explained, but once the market hits a certain scale, it may well travel down the spot road.

"When you have the right supply/demand balance you will have arbitrage opportunities for the traders, then you [will start to see] a proper spot market beginning to function."

From Srinivasan's point-of-view, the emergence of a spot market in ammonia bunker fuel would be a good thing.

"A well-functioning spot market in addition to a contract market would be a sign that the market is developing as expected and that ammonia as a marine fuel and is living up to its expectations.

"A medium-sized trading company trading fuel oil could realistically adapt to trading ammonia if the market goes in that direction."

But from where the market is now, a global market in ammonia bunkers seems a long way off. Nevertheless, in the interim, Yara has slotted marine fuel's potential into its overall scheme of things. 

"We have merged ammonia in shipping with new markets. The team will handle the ammonia sales to four different segments: global shipping; cracking; power generation; and fertilizer.

"As long as the market develops, I can foresee a big role for Yara supplying ammonia to ships."

Whether that happens turns on ammonia becoming the preferred choice for a sizeable chunck of ship owners and operators.  It is too early to say whether or not that will happen. If it does, will Yara Clean Ammonia be a name to watch? To that question, the answer is easy. Most definitely, it will.