Yara warns CBAM suspension would derail US Gulf ammonia production plans

Any suspension of the EU’s new Carbon Border Adjustment Mechanism (CBAM) would jeopardise Yara’s and Air Products’ proposed $8-9 billion low-carbon ammonia project in Louisiana, the CEO of the Norwegian fertilizer major warned today.

Addressing an audience in Oslo, Svein Tore Holsether confirmed while the group would “not take any large investment decisions based solely on CBAM”, uncertainty over the new carbon emissions tax’s future had thrown a spanner in the works of the business case for the huge project.

With a final investment decision (FID) on the 2.8m tonne/year facility at Darrow due in a few months, the senior executive expressed disappointment at the European Commission’s 7 January announcement that officials are to closely monitor its impact on fertilizer prices and demand.

During the press conference in Brussels this week that came after pressure from some governments and industry groups about the impact of CBAM on fertilizer prices, officials said the mechanism could be suspended and applied retroactively to the start of the year.

“It’s been crystal clear that carbon cost would be reflected in the cost of the product,” Holsether said during Yara’s Capital Markets Day, adding Wednesday’s development had caused both “uncertainty and confusion” for market players.

“The additional carbon cost is based on the [European] Commission’s own methodology and default values, so this can’t be a surprise nor an emergency. It’s doing exactly what it was supposed to do,” he said.

“Suspending CBAM while continuing to reduce the EU ETS allowances [climate credits] will reduce the competitiveness of EU producers.

“The intention of CBAM was to put a carbon cost on imports into Europe to mirror the cost that European industry has been subject to for number of years.

“While we are considering investments in US low-carbon ammonia projects, we will take our time to closely monitor the developments before taking FID. For Yara, there is no green transition with red numbers.

“However, if CBAM was to be fully suspended, we’d not be in a position to invest in such projects.”

Yara currently handles around 4m. tonnes/year of merchant ammonia for its own use and consumption by its customers.

The firm recently invested $8 million in quay works at Porsgrunn, Norway, that has allowed the discharge of larger ammonia volumes and generated nearly double that expenditure in logistics savings.

“Our Porsgrunn terminal could only receive handysizes, but performing investment means it can now receive larger vessels,” said Johan Labby, Yara’s EVP of Global Production. “Similar steps are going to be taken at our other European terminals to improve flexibility.”

During today’s event, senior executives at the Scandinavian major expressed the view that ammonia capacity additions in 2026, such as the imminent launch of 2.4m. tonnes/year of new capacity in the US Gulf and a 1.2m. tonne/year plant in Qatar later this year, are likely to trigger a period of lower prices.

They also highlighted how more than three quarters of its European finished nitrogen products are flexible on their ammonia source, meaning traditional grey, low-carbon blue and zero-carbon green feedstocks can all be consumed.

Just over a month ago, Air Products and Yara unveiled plans to connect the industry major’s low-emission ammonia projects in the US and Saudi Arabia with the fertilizer group’s global ammonia network.

Air Products would own and operate the industrial gases production, where about 80% of the low-carbon hydrogen would be supplied to Yara under a 25-year long-term offtake agreement to produce 2.8m. tonnes/year of low-carbon ammonia.

In the Red Sea, the NEOM Green Hydrogen Project in Saudi Arabia is more than 90% complete and expected to start commercial production in 2027.

Air Products is the sole offtaker of up to 1.2m. tonnes/year of renewable ammonia, with the US group eyeing a marketing and distribution agreement where Yara would commercialise, on a commission basis, the ammonia not sold by Air Products as renewable hydrogen in Europe.

The marketing and distribution agreement is targeted to be completed by July 2026, the duo said early last month.