News
19/03/26
Fertilizer industry weighs up war impacts
Fertilizer industry weighs up war impacts
London, 19 March (Argus) — The repercussions of the Middle East war for the
fertilizer sector are mounting — aside from immediate urea, ammonia, phosphate,
sulphur and sulphuric acid price spikes. Vessels' inability to transit the
strait of Hormuz has driven price rises for essential commodities and the threat
of severe shortages across the supply chain. The urea price had jumped by over
$230/t, around 50pc, from $482.50/t fob Egypt on 27 February to $720/t on 17
March, while the ammonia price has climbed by $115/t, or 24pc, from $495/t fob
Middle East on 27 February to $600/t on 18 March. Strikes on infrastructure
across the Mideast Gulf and force majeures could further squeeze availability.
Protecting domestic supply The ripples of the war extend far beyond the Gulf
region. Oil and gas are both vital for the global fertilizer supply chain, and
the disruption to their supply has prompted government directives to protect
fertilizer and energy supplies. India has issued a directive to prioritise
domestic natural gas and regasified LNG supply to the city gas network,
designating fertilizers as a second-priority status and limiting gas supply to
70pc of the sector's typical needs, although recent reports suggest it may be
nearer 75pc. India relies heavily on imports of raw materials to feed its
extensive fertilizer industry and on imports of finished fertilizers, mainly
urea and DAP. Over half of India's natural gas imports come from the Middle
East, along with around 80pc of its ammonia requirements. India produces 2.6mn
t/month of urea, with gas the key feedstock, but this latest directive has
resulted in an estimated production drop of some 800,000 t/month. China has vast
nitrogen and phosphate fertilizer production capacity, and has become a major
exporter during its off season. In a normal year, India would look to China to
supply much of its nitrogen and phosphate fertilizer shortfall, but China is
concerned at the sulphur and energy supply squeeze and is taking measures of its
own. Chinese urea or other nitrogen fertilizer exports are unlikely to be
available in the near future. China imports around 45pc of its crude from the
Middle East, along with 25-30pc of its LNG. Around half the 9.6mn t of sulphur —
essential for phosphate fertilizers — that China imported in 2025 was from the
Middle East. The price of sulphur rose by some 600pc in the two years to January
2026, leading to the erosion of demand, with prices only starting to correct
back down on the eve of the conflict. Because of rapidly rising sulphur prices,
China had already halved its sulphuric acid export schedule on the year in
January-April in an attempt to preserve sulphur for its own needs. There may be
no exports of Chinese TSP and SSP , or DAP and MAP, before August, unless the
sulphur price falls. The US' sanctions enforcement arm is allowing imports of
crude, refined products and fertilizers from Venezuela. President Donald Trump
has also announced a Jones Act waiver to facilitate deliveries of key
commodities, including fertilizers, between US ports. Separately, a letter
signed by 64 agricultural groups on 13 March urged fertilizer producers Mosaic
and JR Simplot to help stabilise prices by withdrawing support for
countervailing duties on the US' Moroccan phosphate fertilizer imports. Bracing
for shortages and price hikes The lack of Chinese nitrogen and phosphate
fertilizer exports, in addition to Middle East supply constraints, will have a
substantial impact — not only in India, where the situation could turn critical,
but in the agricultural powerhouses of Brazil, US and Australia. Australia
imported over 60pc of its urea from the Middle East in 2025. Current domestic
supplies will last until mid-April, but beyond that it will have to turn to
alternative sources, including southeast Asia. Brazil is just starting its
purchasing campaign for the 2026-27 soybean season and would normally be looking
to cover 25-30pc of its extensive phosphate fertilizer requirements from China.
But without Chinese product and the war constraining Saudi phosphate fertilizer
shipments and sulphur and ammonia shipments to other major phosphate fertilizer
producers such as Morocco, prices will rise. Brazil depends almost entirely on
imports to cover its urea requirements, with around half of these typically from
the Middle East. In Europe, the market is watching to see whether the European
Commission classes the war in the Middle East as a "serious and unforeseen
circumstance", triggering the suspension of the carbon border adjustment
mechanism for fertilizers — a process that could take months. Although most
requirements are now covered for the main season that is now under way,
fertilizer prices in Europe are rising as a direct result of fears over
shortages and affordability. By Sarah Marlow Send comments and request more
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