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The global trade of ammonia is increasing every year with a rise in trade projected until at least the middle of the century. With ammonia becoming a more popular player in the energy and agricultural industry along with a role in decarbonisation efforts, maritime transport will have to follow suit with a much-needed spike in very large ammonia carrier (VLAC) orders. Ammonia, commonly used in fertilizer production and as a component in chemicals and explosives, is gaining attention due to its low carbon properties which makes it an attractive option for co-firing in power plants and as an alternative fuel in the shipping industry. Production of basic feedstock for inorganic fertilizers accounts for around 77% of today’s annual ammonia use. Another large percentage of ammonia use goes to the production of AdBlue for vehicle NOx control. According to brokers Intermodal, the global trade of low-carbon ammonia is expected to witness a significant surge, reaching around 69m tonnes by 2040. The highest demand will come from Japan and South Korea due to their decarbonisation initiatives. The Middle East and Australia are emerging as major exporters, contributing more than 65% to the global trade volume. 150 dedicated VLACs will be needed by 2030 In its report, Intermodal claimed that the ammonia industry experienced a year-on-year growth of 2.9% in 2023. This upward trajectory is set to persist through 2024 and 2025, with forecasts indicating an annual growth rate of approximately 4%. The International Renewable Energy Agency (IRENA) said in its 2022 Innovation Outlook that global ammonia demand would increase by more than 40m tonnes per annum by 2030, representing a 20% increase from 2020 levels, with growth driven primarily by rising fertilizer needs due to population growth. Martin Cartwright, global business director for gas carriers and FSRUs at DNV, tells Splash Extra that there are strong ambitions globally regarding increased ammonia production and if a business-as-usual growth scenario continues, production capacity will double by 2050. “For real volume change, you must take note of the next wave of demand coming from the energy sector and other sectors looking to utilise it as fuel. Here we can watch the capacity developments of blue and green ammonia, where large export volumes will be transported by seaborne trade and so we can expect seaborne volumes to increase tenfold,” Cartwright says. Ammonia is typically transported using large- and medium-sized gas carriers. With a surge in demand for green ammonia as both a bunker fuel and a power generation resource, there's an increasing demand for specialised vessels like VLACs. VLACs are the next generation of very large gas carriers (VLGCs), originally designed to transport LPG, in the 80,000 to 95,000 cu m size range. They are now being engineered to transport ammonia as well. The increasing demand for ammonia as a clean energy source is set to increase the need for these types of vessels. The existing orderbook for VLACs includes 36 vessels, with a significant 83% being constructed by South Korean shipbuilders. They will have dual-fuel propulsion engines. The delivery of these vessels is expected to begin in late 2026 and will peak in 2027 when 28 vessels will enter the fleet. One of the latest orders for such vessels came from Japanese shipping line Nippon Yusen Kaisha which made a deal for three VLACs with HD Hyundai in a deal worth $366m. The first newbuild, according to Clarksons, is set to join the fleet in December 2027 while the last one will be delivered in June 2028. Also, reports point to Trafigura as a potential future HD Hyundai customer for six VLACs worth about $750m. Since the beginning of 2024, shipbuilders have received orders for 15 VLACs worth north of $1.8bn. Jens Ismar, executive director at Exmar, believes that medium-sized vessels will remain the main carriers of ammonia for the foreseeable future. He has publicly expressed his surprise by the current VLAC orderbook and called the carriers “a hot asset.” “Most of these vessels will likely trade in LPG when delivered in 2027 and will primarily be VLGCs with ammonia optionality. However, to absorb these new vessels we need continued growth in the LPG exports as the main driver and some additional ammonia volume,” Ismar says. IHS data from December 2023 stated that there are 66 confirmed VLGCs scheduled for delivery until 2027, however, not all will be built capable of transporting ammonia. “In this respect, it is expected that once the ammonia demand picks up – considering that there might not be sufficient ammonia cargo capability tonnage on the water – there will be a need to borrow tonnage from existing LPGCs or MGCs up to 45,000 cu m in operation, to serve that demand,” Constantinos Chaelis, gas markets and technology lead at Lloyd’s Register (LR), tells Splash Extra. For that reason, the maritime industry is looking to adapt LNG carriers for ammonia transportation. Lloyd’s Register projections see LNG newbuildings having innovative tank and cargo containment systems adaptable for ammonia carriage from 2030 onwards, to maintain regulatory compliance and operational versatility. Professor Lynn Loo, CEO of the Global Centre for Maritime Decarbonisation, has her own ideas on the growth of the ammonia fleet. “Assuming this increase in ammonia is traded by ships entirely, we may need up to 50 VLACs, each capable of transporting approximately 800,000 metric tonnes of ammonia annually, by 2030. If, on the other hand, only 10% of this increase is traded by ships – currently only 10% of annual ammonia production is traded by ships, then five VLACs can satisfy our needs by 2030,” she says. She adds that a further boost in VLAC demand could occur beyond 2030 as renewables-limited countries start using ammonia for power generation and its popularity as a marine fuel increases. There is always one constant in the transportation industry – growth in demand for a product will, inevitably, be followed by a rise in demand for the transportation of the product. Maritime Strategies International (MSI) said recently that a rise in orders for VLACs will accelerate once the hydrogen economy moves past the theoretical stage. According to MSI, the role of alternative fuels in powering the low-carbon economy will dramatically increase volumes of renewable ammonia, outstripping growing volumes of renewable methanol. Numbers-wise, that means that the next 25 years are likely to see the ammonia trade transformed with requirements for green and blue ammonia providing the impetus for owners to order close to 400 VLACs compared with a current fleet of 375 VLGCs focused on carrying LPG. In contrast, though a requirement for around 215 methanol carriers will be significant, it compares to an aggregate 280-strong methanol-capable fleet of 35,000 dwt and above at the end of 2023. “Despite facing high costs and safety issues, clean ammonia’s role as a prospective marine bunker fuel, a hydrogen carrier for use in power generation, and industry feedstock has solidified its place in the green transition, especially for high-volume uses,” MSI explained. The analysis also claimed that future volumes of blue and green ammonia are set to dwarf the existing grey trade currently focused on fertiliser production. Now, 200 harbours worldwide have ammonia terminals that serve the international trade volume of around 20m tonnes per year of ammonia as cargo out of 200m tonnes per year currently produced. The blue and green ammonia industry is anticipated to achieve clean exports in the region of around 30m tonnes by 2030 and could top 300m tonnes by 2050. In the more near-term, LR’s Chaelis says that based on the projected ammonia demand and expected ammonia production it is anticipated that over 150 dedicated VLACs with a capacity greater than 80,000 cu m and capable of transporting over 70m tonnes per annum of ammonia cargo will be required by 2030. However, pinpointing the exact number of newbuilds by 2030 or any other year is not as easy a task as it might seem. Cartwright from DNV puts this down to a limited number of slots in shipyards and the several ammonia-capable carriers sailing today. According to him, making an accurate forecast is challenging but VLGC/VLAC flexibility could be the solution to the slot congestion problem.

The rise of the seaborne ammonia trades

Acronym-heavy shipping needs to get used to a rising four-letter vessel type. VLACs are being tipped to overhaul VLGCs in a changing of the guard in the gas trades

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