With the closure of a single waterway the fertilizer industry has been thrust into a difficult period. In the wake of the US-Israeli attacks on Iran the country announced the closure of the Strait of Hormuz in the Persian Gulf – a critical junction which sees approximately one-third of the world’s fertilizer exports pass through. With the closure of the strait due to the threat of mines and potential missile strikes out of Iran, shipping has essentially come to a halt. Now, as previously discussed in the comment for the January/February issue of World Fertilizer in relation to the invasion of Venezuela, fertilizers are a commodity that are vulnerable to wars and geopolitical upheaval.
One of the chief concerns is the impact on affordability. Since the outbreak of the war fertilizer prices have spiked, with urea prices surging by 35%1 and calcium ammonia nitrate prices rising by 15% in Lower Saxony, Germany.2 Existing trade agreements have been interrupted, with India recently agreeing to buy 1.3 million t of urea from the Middle East, which now may not arrive in time. Brazil relies almost entirely on urea imports, half of which typically comes through the Strait of Hormuz.3 Meanwhile, Saudi Arabia’s Maaden has sought to alleviate some of the challenges and hardship by diverting exports via the port of Yanbu in the Red Sea.4 But this requires moving large amounts of fertilizer across the country, adding additional cost and complexity. It also does not provide a guarantee of safety, as the Houthis in Yemen still conduct attacks on ships in the region. Nevertheless, Saudi Arabia is fortunate to have access to an alternative export route while other major exporting nations like Qatar remain isolated.
The other issue to address is the loss of oil and gas assets in the region. Fertilizer production is energy-intensive and relies on natural gas as a feedstock, with energy making up as much as 70% of production costs.3 The near closure of the strait, combined with missiles strikes across the gulf on energy facilities, have forced many energy production sites to pause output. Subsequently, this has shut fertilizer plants in the Persian Gulf and beyond with three urea plants in India cutting their production capacity as LNG supplies from Qatar cease.3
The conflict could not have come at a worse time for farmers in the western hemisphere as they prepare for the spring fertilizer application season. Without proper fertilization, yields could decrease and in extreme cases some isolated regions could experience a period of scarcity. In Europe, sources of fertilizer were already tight with the sanctions placed on Russian fertilizer, now that tight grip could turn into a stranglehold if things are to continue as they are. Recent developments have highlighted the importance of countries securing their own domestic supply of fertilizers, whether that be through greater investment into local production facilities or taking the time to build up long-term storage reserves. The conflict in the Middle East has fully exposed the vulnerabilities of having an over-reliance on imports – for a secure fertilizer future, nations should learn from this and invest more in home grown-fertilizer production.
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