Why Is Anhydrous Ammonia So Expensive Right Now?
Product guide
It’s not just your imagination: Anhydrous ammonia is rising in price. Anhydrous ammonia is critical across a variety of industries. But one of the places where this cost increase is felt at the moment is in the agricultural sector, where anhydrous ammonia is used as a fertilizer to infuse the soil with nitrogen, an essential element needed to foster healthy plant growth.
AgWeb reported on this trend in 2021, sharing the sentiments of fertilizer experts and growers all over the country. Of the price increase, one such expert exclaimed, “I’ve been in the industry for 20 years now, and I cannot remember it ever jumping this far this fast.”
Some farmers and fertilizer companies watched the price of anhydrous ammonia rise by 60 percent between the fall of 2020 and the spring of 2021.
So, what’s the reason behind these high prices? It’s not just farmers that are feeling the pinch. Anhydrous ammonia shows up in the manufacturing of all kinds of products, which means prices are going up everywhere. And it’s not price gouging or some kind of unexplained phenomenon. Here’s a look at several factors contributing to the changing rate of anhydrous ammonia.
A Look Inside: Manufacturing Anhydrous Ammonia with Natural Gas
One reason that anhydrous ammonia seems to have increased in price is related to the use of natural gas to make this product.
Here’s the thing: Nitrogen, one of the primary elements used in the creation of ammonia, exists all around us. In fact, the Noble Research Institute reports that our atmosphere is 80 percent nitrogen. However, this nitrogen is not readily usable in its natural state as it shows up in the atmosphere. Some nitrogen is sent earth-bound in a few ways:
- Lightning strikes convert some nitrogen into a form usable by plants
- Rain washes some nitrogen into the soil
- Bacteria in blue-green algae consume and convert atmospheric nitrogen into forms that plants can use
However, nitrogen isn’t used solely to encourage healthy plant growth, and the small amounts of nitrogen infused in the soil in these ways just isn’t enough to keep up with demand. Nitrogen—and anhydrous ammonia—has many uses, and must be manufactured to keep up with all of these uses. It is used as a fertilizer, but also as a refrigerant, for water treatment, in the creation of biofuels, in the manufacture of pharmaceuticals, paper, and pulp, and in the making of some polymers and explosives.
This is why nitrogen must be converted into anhydrous ammonia for commercial use. Natural gas plays an important role in this process.
In 1910, scientists found they could put amounts of natural gas and nitrogen from the atmosphere together under a great deal of pressure at very high temperatures to form anhydrous ammonia gas. Temperatures climb to around 900℉ and pressure soars to somewhere between 200 and 1,000 atmospheres to form this gas. The natural gas reacts with the atmosphere, supplies hydrogen, and increases the temperature to encourage this chemical reaction to happen.
In fact, manufacturing one ton of anhydrous ammonia needs 33,500 cubic feet of natural (methane) gas, accounting for the bulk of the cost of manufacturing anhydrous ammonia. So, a lot of natural gas is needed to make this happen—and natural gas changes in price based on many, many factors. That’s why anhydrous ammonia and nitrogen fertilizers have been so high; because the price of natural gas is climbing.
The Rising Costs of Natural Methane Gas
Since the creation of anhydrous ammonia is so reliant on natural gas, it makes sense that as the price of natural gas increases, so does the cost to manufacture anhydrous ammonia.
The Noble Research Institute shared that when natural gas costs $2.50 for every thousand cubic feet, the cost to manufacture one cubic ton of anhydrous ammonia is $83.75. But when the cost of methane gas is $7.00 per thousand cubic feet of natural gas, the cost increases by $150.75, climbing to $234.50 in natural gas costs alone.
While the production of methane gas is up in the United States, so too is the global demand for natural methane gas. Additionally, more natural gas is needed for power production across the country. Other reasons that Forbes has reported that the cost of natural gas has quadrupled over the last two years?
- Increased export of liquefied natural gas outside of the United States
- A rise in demand for natural gas to make up for the lack of natural gas exports from Russia following the onset of the war in Ukraine
- Concerns about the state of oil and natural gas markets combined with increased demand leading to rising prices
The Cost of COVID-19, Weather, and Supply and Demand
Like almost every aspect of the global supply chain, the production of anhydrous ammonia was impacted by COVID-19. Just in the agricultural industry, some estimates state that more than 2 million tons of anhydrous ammonia are applied to crops in the fall planting season alone. But commodity prices rose starting in 2020 during the pandemic (thanks, likely in part to a strained workforce), and high global demand in relation to supply meant prices rose.
What’s more, harsh winter storms in 2021 and 2022 mean that natural gas has to be rerouted to people to power their grids and heat their homes. This slowed the production of anhydrous ammonia in nitrogen plants. John Linville, a fertilizer expert shared with AgWeb that, “All of a sudden we lost a lot of production. And it took a while for these plants to come back online.”
He continued, explaining that the production of anhydrous ammonia and nitrogen is complicated. These are complex manufacturing operations that work under high pressure and high temperatures. Some plants had to shut down production of anhydrous ammonia for as long as two weeks, which cut into an already short supply.
So it seems that the lingering effects of COVID-19-related shutdowns, frigid winter weather, and high demand across the globe have factored into the cost of anhydrous ammonia production just as much as the climbing costs of natural gas.
Airgas Specialty Products: Your Trusted Anhydrous Ammonia Supplier
At Airgas Specialty Products, we keep an eye on what’s happening in our industry—all because we know how it can impact you. No matter what, we’re dedicated to providing you with the exceptional products and services you need to keep your operations running. We understand that when the cost of essential supplies like natural gas increases, your business feels it, too.
That’s why we’re committed to keeping costs as low as possible for you and making the availability of anhydrous ammonia simple, effortless, and worry-free, no matter the time or the day of the week. We’re here for you with 24-hour, 7-day-a-week delivery and service so you can keep going, no matter what.
Can we help you? Contact us today to learn more about what we can do for you.