Ammonia cost and gas prices

Ammonia (NH3), the foundation of the entire nitrogen fertiliser chain, is produced almost exclusively from natural gas via the Haber-Bosch process. Gas serves simultaneously as feedstock and the main energy source for this synthesis, making ammonia manufacturing extremely sensitive to shifts in natural gas pricing. This structural dependency shapes the geographical siting of production facilities and the competitiveness of different industrial basins.

Production cost structure

At a gas price of 7 USD per million British thermal units (MMBtu), natural gas expenses absorb roughly 87% of ammonia cash manufacturing costs according to the Handbook 2025 example^[1][2]. Based on typical consumption of 36 MMBtu per tonne of ammonia, gas amounts to 252 USD/t NH3, with approximately 39 USD/t of other production costs added, giving a total of 291 USD/t^[1]. Each one-dollar rise in gas price mechanically translates into an extra cost of 36 USD per tonne of ammonia^[1].

Energy efficiency gaps between sites are substantial: a new, well-optimised unit can achieve the low thirties of MMBtu per tonne, whereas an ageing, poorly maintained plant runs in the mid-forties^[1]. With most other cost items being fixed, economies of scale strongly favour large single-train capacities^[1].

Pass-through to urea and derivatives

Ammonia is the unavoidable intermediate for all nitrogen fertilisers: prilled urea, ammonium nitrates, CAN, UAN solutions and NPK fertilisers. For urea, roughly 0.58 tonne of ammonia is required per tonne of finished product^[3]. Adding process gas (5.2 MMBtu/t of urea), the natural gas share reaches about 72% of total urea cash costs^[3]. The cost structure then breaks down as 169 USD/t for incorporated ammonia, 36 USD/t for process gas and 46 USD/t for other charges, totalling 251 USD/t excluding freight and loading^[3].

Price dynamics in the US market

The American market illustrates the tight correlation between the two prices. In 2025, spot gas at Henry Hub ranged between 2.42 and 10.07 USD/MMBtu for most of the year, averaging around 3.44 USD/MMBtu, a level above that of 2024. This increase stemmed from disruptions in global trade, robust domestic demand driven by compressed planting windows, and evolving trade policies^[2]. The Energy Information Administration projected averages of 3.56 USD/MMBtu in 2025 and 4.01 USD/MMBtu in 2026^[2].

The weekly ammonia quotation on the US Gulf Coast stood at 490 USD/short ton in early 2025, before retreating to 357 USD/st at end-June and rebounding to 492 USD/st at end-September^[2]. Across the full year, the average price was estimated at 450 USD/short ton^[2]. US ammonia output reached 14,000 thousand short tons in 2025, up from 13,600 thousand in 2024^[2]. Imports for consumption came to 1,900 thousand short tons, year-end producer stocks stood at 440 thousand short tons, and net import dependency fell to 5% of apparent consumption^[2].

Industrial location and carbon challenges

The dominance of gas in the cost structure explains why nearly all new nitrogen capacity outside China is being installed in low-gas-price regions: the Middle East, North Africa and North America^[4]. European production additionally bears a carbon cost through the EU ETS, with a product benchmark set at 1.57 tonnes of CO2 per tonne of ammonia and actual emissions ranging between 1.8 and 2.4 tCO2/t NH3^[1]. Several decarbonised ammonia projects using carbon capture are emerging in North America^[2].