Material Insights · Understanding the Material World

Ammonia and Thermal coal

About a quarter of the world's ammonia is made by gasifying coal, almost all of it in China, where coal is cheaper and more secure than gas. India is trying the same route to cut LNG imports for urea, but its first plant at Talcher has been delayed and was targeting commissioning by December 2027.

Ammonia (chemical) and Thermal coal (energy): 4 relationships.

How they are linked

1. Coal gasification

Physical flow · Strong · Coal to ammonia

Gasifying coal with steam and oxygen makes a synthesis gas whose hydrogen is combined with nitrogen to make ammonia, replacing natural gas as the hydrogen source.

  • 26% of world ammonia made by coal gasification, 2020
  • 76% of China's ammonia production capacity coal-based (2024 study)

Nearly all coal-based ammonia is in China, which lacks cheap domestic gas but has abundant coal. Outside China the route is rare, as most producers have access to gas.

Sources: IEA; H. Zhao, Delft University of Technology (arXiv)

2. Rival to gas

Substitution · Medium · Coal route competes with gas route

Where gas is scarce or expensive, coal gasification offers another way to make the same ammonia, so the relative price of coal and gas decides which route is cheaper.

  • 3.2 t CO2 per t of ammonia from coal gasification, best technology
  • 1.8 t CO2 per t of ammonia from gas reforming, best technology

The coal route gives security of supply where gas is imported, but it emits almost twice the CO2 per tonne, which makes coal ammonia the most exposed to future carbon pricing or border carbon rules.

Sources: IEA

3. Price link: alternative route

Cost and price · Strong · Both ways

Chinese coal costs set the cost of a large block of world ammonia and urea supply, and coal and fertiliser prices also share the wider energy cycle.

  • 0.22 monthly change correlation
  • 0.74 12-month change correlation
  • 0.43 fitted elasticity

The proxy is Australian thermal coal against a nitrogen fertiliser index; the strong yearly link reflects common moves in coal, gas and fertiliser in energy crises such as 2022 as well as the direct cost link. Chinese plants use domestic coal, so the link to seaborne coal is indirect.

Sources: Material Insights (World Bank, FRED, IMF data)

4. India's coal gasification push

Policy · High in India · Coal policy to fertiliser supply

India has large coal reserves but imports much of the gas its urea plants use, so it plans to gasify domestic coal for fertiliser and chemicals.

  • 100 Mt coal to be gasified a year by 2030, national target
  • 1.27 Mt a year urea capacity of the Talcher coal gasification plant
  • 63% share of imported R-LNG in fertiliser sector gas use, 2020-21

Talcher, in Odisha, was due to start in September 2024 but was delayed by the pandemic and by problems with its Chinese contractor; in April 2026 the state reported a target of commissioning by December 2027. Its progress is the main test of whether coal gasification can be built at scale in India and at what cost.

Sources: Press Information Bureau, Government of India; IEEFA; The Week (PTI); OmmCom News

For investors

Key learnings

  1. Coal gasification supplied about 26% of world ammonia in 2020, almost all in China, so Chinese coal costs and export policy influence world urea prices.
  2. The coal route emits about 3.2 t CO2 per t of ammonia against 1.8 t for gas, so it is the most exposed to carbon pricing.
  3. India's coal-to-urea plans depend on Talcher, a 1.27 Mt a year urea plant that missed its 2024 start and now targets December 2027, so execution risk is high.

What to track

  • Chinese domestic thermal coal price: Rising coal costs raise the cost of Chinese ammonia and urea exports (Weekly · China Coal Transportation and Distribution Association; Qinhuangdao spot prices)
  • Chinese urea export policy: Export curbs remove coal-based supply from world markets and lift prices (As announced · Chinese customs and NDRC)
  • Talcher commissioning progress: Start-up would show whether coal-based urea is viable in India (Quarterly · Coal India, RCF, GAIL updates)

For policymakers

Key learnings

  1. Coal gasification can reduce India's dependence on imported LNG, which was 63% of the fertiliser sector's gas in 2020-21.
  2. The route nearly doubles CO2 per tonne of ammonia compared with gas, so it conflicts with climate goals unless carbon is captured.
  3. Execution is the main risk: India's first plant, Talcher, missed its 2024 start after contractor problems and was targeting December 2027 in 2026.

What to track

  • Coal gasified against the 100 Mt by 2030 target: Shows whether the mission is on track (Yearly · Ministry of Coal)
  • Coal gasification incentive awards: Shows private and public interest in new gasification projects (As announced · Ministry of Coal)

India

India aims to gasify 100 Mt of coal a year by 2030, partly for fertiliser; its first coal-to-urea plant at Talcher, rated at 1.27 Mt of urea a year, missed its September 2024 start and was targeting commissioning by December 2027.

Sources

  1. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)
  2. Ammonia Technology Roadmap, IEA (2021)
  3. The role of green ammonia in meeting challenges towards a sustainable development in China, H. Zhao, Delft University of Technology (arXiv) (2024)
  4. Ministry of Chemicals and Fertilizers press release, 7 January 2023, Press Information Bureau, Government of India (2023)
  5. LNG and India's fertiliser sector: a trillion rupee subsidy burden, IEEFA (2022)
  6. Talcher fertiliser plant revival faces delays due to COVID-19, Chinese contractor issues, The Week (PTI) (2025)
  7. Chief Secretary reviews progress of Talcher Fertilizers project, targets December 2027 completion, OmmCom News (2026)