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China’s commitment to what it calls its “dual carbon” goals of carbon neutrality by 2060 and to ammonia’s potential role as a hydrogen derivative and carrier have fostered expectations that its renewable ammonia market will expand significantly and thus so will production. China is also expanding its electrolyzer manufacturing capacity, which will be a key component of renewable hydrogen production.[1] This confluence of factors positions China well to transform its ammonia sector significantly in the coming years toward renewable-based production.
This post analyzes the current state and future of China’s renewable ammonia production. It finds that around 9 million tons per year (Mt/yr) of renewable ammonia production is currently at various stages of development. This evolution is driven by two types of (mostly) state-owned companies – electricity generators/distributors and fossil fuel/chemical conglomerates – though as of now a small group of companies is leading the way.
The Current State of China’s Ammonia Market
China is currently the world’s largest producer of ammonia. In 2022, its annual ammonia production stood at 56 Mt, or nearly 30 percent of global production.[2] This voluminous output is largely consumed domestically[3]—making China the world’s largest ammonia consumer as well. In 2020, agriculture utilized 71 percent of China’s total supply, while industrial applications accounted for the remaining 29 percent.[4] During the previous decade, China dealt with substantial overcapacity in ammonia production, which reached 30 percent at its height.[5] While the phaseout of inefficient facilities between 2015 and 2019 largely resolved this issue, capacity entered a new phase of growth since 2020 due to fertilizer shortage caused by supply chain disruption during Covid, efforts to reduce reliance on imports as well as anticipated demand growth, and a supportive regulatory environment for renewable ammonia.[6] Additionally, China recently expressed interest in implementing renewable ammonia co-firing (in coal-fired plants) as a way to reduce carbon emissions, which could increase future demand for renewable ammonia.[7] But renewable ammonia production is still nascent in China. Not only is the country’s ammonia production almost entirely fossil based (99%), it also mainly relies on coal (85%),[8] among the most polluting pathways for ammonia synthesis (3.5 to 4.5 tons [t] CO2/t of product).[9] (Elsewhere, ammonia is typically produced from natural gas with a lower carbon footprint of 1.8 to 2.6 t CO2/t of product.[10]) Thus, in 2022, whereas China accounted for 30 percent of global ammonia production, it accounted for 45 percent of worldwide ammonia-related CO2 emissions.[11] To address this, in June 2024, the National Development and Reform Commission announced a new ammonia industry special action plan with a target of 13 Mt of CO2 emission reduction by 2025, mostly through the retirement and retrofit of inefficient facilities.[12]
Barriers and Drivers
Shifting from emissions-intensive to low-emissions ammonia typically involves the development of “green” or renewable ammonia, which is produced from nitrogen and hydrogen from electrolysis powered by renewable electricity, and “blue” or low-carbon ammonia, which is produced from natural gas or coal with carbon capture and storage (CCS). Thus far, since early 2022, China’s low-emissions ammonia production has been predominantly focused on renewable ammonia (Table 2). This is attributable to China’s limited commercial expertise in and constrained policy support for CCS as well as insufficient domestic gas resources.[13] Out of 96 carbon capture, utilization, and storage (CCUS) demonstration projects in China, only one is associated with hydrogen production and one for blue ammonia production.[14] Moreover, producing low-carbon ammonia would perpetuate reliance on coal.
Yet the rapid uptake of renewable ammonia in China faces challenges, including most notably high production costs. While the market price of ammonia in the country ranges from $420 to $570/t (3,000-4,000 yuan/t), the production cost of renewable ammonia is estimated to range from a low of $400 to a high of $820/t.[15] But China is hardly the only country planning to develop low-emissions ammonia, and could also resort to imports if those are cheaper. Therefore, it is still uncertain how China’s development in renewable ammonia may affect future trade. Some analysts have suggested based on China’s recent decision to start importing blue ammonia from Saudi Arabia that the country may become an ammonia importer in the future.[16] Chinese firms are also leveraging the One Belt One Road initiative, a global infrastructure development strategy adopted by the Chinese government, to expand their presence overseas, including through planned investments such as a $6.75 billion renewable hydrogen (50,000 t) and ammonia (250,000 t) plant in Egypt’s Suez Economic Zone aimed at exporting to Europe, a project in Morocco to produce 1.4 Mt of renewable ammonia, and a project in Brazil to produce 60,000 t of renewable ammonia.[17] Such projects could be used to source ammonia for the Chinese market. Still, many experts are convinced that China will primarily focus on being self-sufficient.[18] Given the importance of food security, it is unlikely that China will resort to significant imports. Based on its recent progress in port infrastructure to support ammonia exports, the country could even position itself as a net exporter of renewable energy.[19] Regardless of China’s future trade outlook, its domestic renewable ammonia pilot projects, such as the 180,000 t/year plant in Da’an, Jilin province, have made notable headway in recent years thanks to a confluence of policy support and private sector interest in the context of the country’s broader “dual carbon” push.[20]
At a national level, key state institutions have called on China to “actively guide ammonia to shift from high-carbon to low-carbon processes” and “promote the development of industrial technology powered by renewables.”[21] These calls are attributable to Beijing’s commitment to tackle the emission intensity of heavy industries as a part of achieving its “dual carbon” goals. National commitments are then implemented at a provincial and municipal level. Thus, more than 14 sub-national authorities have cited renewable ammonia development in their policy guidelines.[22] Some localities have shown more eagerness to employ industrial development policy than others; Jilin Province in the northeast, for instance, has repeatedly called for the construction of a “Northern Hydrogen Valley” to promote industrial and economic activity in the region.
Table 1. Summary of renewable ammonia projects in China
Product Status Operational Under Construction Planned Total
Number of Projects 2 10 28 40
Total Ammonia Production Capacity (t/yr) 720,000 2,445,000 5,948,000 9,113,000
Source: Adapted from the Appendix.
Existing national and sub-national policy guidelines on renewable ammonia tend to be high level and make scant mention of specific incentives, but several trends can be identified: A capacity of 9.1 Mt in total is planned, under construction, or operational across China, including 3.2 Mt from projects that are operational and under construction – representing 4 percent of existing ammonia capacity (77 Mt) in 2023.[23] New projects are concentrated in regions that are rich in wind and solar resources, particularly Inner Mongolia and the Northeast regions (Jilin, Liaoning, and Heilongjiang). Most projects announced thus far have been developed by major state-owned enterprises, which regularly involve private partners in research, financing, and construction at the project level (see Appendix), and are designed to be largely self-sufficient, with low power storage levels and onsite generation staying behind the meter.
Most existing renewable ammonia players fall under two categories: electricity generators/distributors and fossil fuel/chemical conglomerates. Each has exhibited different preferences and strategies in project siting and construction. Electricity generators/distributors with existing positions in renewables (e.g., State Power Investment Corporation, China Energy Engineering Corporation, and Shenzhen Energy Group) have been responsible for most new announced projects and demonstrate a clear focus on facilities with same-sited wind/solar capacity. In contrast, fossil fuel/chemical enterprises (e.g., Sinopec and China Energy Investment) have preferred “greening” existing petrochemical facilities in oil and gas resource centers with integrated downstream production capacity (particularly of methanol).
Overall, a small contingent of companies is leading the way in renewable ammonia, with China Energy Engineering playing an outsized role. Planned capacity is highly concentrated in the “sub-million ton” level, which is comparable to the typical capacity of traditional ammonia plants.
Conclusion
By targeting an existing consuming hydrogen sector, China can speed up the development of its hydrogen industry. Indeed, renewable ammonia projects can benefit from China’s large domestic electrolyzer manufacturing capacity and robust development of wind and solar resources, while more such projects would lend electrolyzer manufacturers a huge outlet for their products, enabling them to consolidate their global lead.[24] One key uncertainty that remains is the appetite of Chinese end-users for a more expensive product in the absence of any tax credits, subsidies, or regulatory constraint similar to what can be found in Europe or the US, even as Chinese renewable hydrogen is likely to be much cheaper than Western equivalents.
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