The war in West Asia is roiling India’s fertilizer trade, with imports hurt by increased shipping costs and the closure of a major road, and domestic manufacturing affected by gas shortages, analysts and fertilizer industry executives said.
Fertilizer import deals are usually completed during the December-February period for the summer season, but with shipping costs doubling and no ship able to clear the Strait of Hormuz, a globally critical checkpoint for most shipments, analysts say the situation is disastrous.
The local crop nutrients industry faces another major risk: a shortage in imported gas supplies, which is setting fertilizer plants on fire. Qatar on Monday suspended liquefied natural gas production, as Iran continued to retaliate against Gulf states following Israeli and US strikes against it. India imports about 50-60% of its natural gas needs.
In 2024, the domestic fertilizer industry will account for about 30.6% of India’s total natural gas consumption, making it the largest single user. India is the largest importer of UAE LNG and the second largest buyer of Qatari gas, according to data from the Ministry of Commerce.
“State-run gas companies have already started rationing gas supplies to industrial buyers from Tuesday,” said a fertilizer industry executive who requested anonymity.
The benchmark freight rate for large crude oil tankers rose on Monday to an all-time high of $423,736 per day, according to the London Stock Exchange Group. This had a ripple effect on all containerized cargo. “The increases, including freight and insurance, have raised fertilizer import costs by about 25-30%,” said Subal Sharma, director of fertilizer trader Epic Abundance Ltd.
Shipping movement through the strait between Iran and Oman stopped. In addition to global trade, the waterway is a vital corridor for Indian shipments, carrying half of India’s crude oil and gas, nearly 60% of its fertilizers and most other commodities.
“Indian importers last month concluded imports of 1.3 million tonnes of urea for the summer season,” said Anand Teotia, agent, Sai Fertilizers Ltd. “The focus now is on how to safely deliver existing contracts, rather than on future deliveries, for which a wait-and-see attitude is being adopted.”
India is a net importer of fertilizers, purchasing between 20 and 21 million tons annually. Imports of finished products and raw materials come almost entirely from West Asian and Gulf countries, as well as producers in North Africa, such as Egypt and Morocco.
Finance Minister Nirmala Sitharaman told Parliament on December 15 that India has sufficient buffer stock of fertilizers for the winter planting season. Urea stocks as of October 31 stood at 6.8 million tons, above winter demand of 5 million tons.
Qatar, the UAE and Oman together supply nearly 76% of India’s sulfur imports, while Qatar, Saudi Arabia and Iran are the top three exporters of urea, the most widely used agricultural nutrient in India. All of them are shipped to the country through the Strait of Hormuz.
Morocco, which supplies India with phosphate, usually uses the Soyuz-Red Sea Canal, where ship movement has become difficult due to potential attacks from Yemen’s Houthis, Iran’s allies. Nearly 40% of supplies use the Suez waterway.
According to DK Acharya, a consultant with the Indian Fertilizer Association, fertilizer supplies from Russia are important for India, as they accounted for nearly a third of total imports last year, having risen three-fold in the past three years to more than $1.7 billion.
Analysts said that the continuation of the conflict for a long period represents a major risk to prices and availability.
Global container shipping lines, such as Hapag-Lloyd, CMA CGM and MSC, have reversed decisions to return to the Soyuz Canal-Red Sea route due to the escalating risk of attacks from the Houthis in the wake of the Iranian conflict.
The Red Sea risks jeopardizing imports from Russia, another major supplier of phosphate-based nutrients to India, which uses the Bab al-Mandab waterway through Suez to reach Indian ports.
Fertilizer supplies from Russia are important for India and accounted for nearly a third of total imports last year, having risen three-fold in the past three years to more than $1.7 billion, said DK Acharya, a consultant with the Indian Fertilizer Association.
Experts said they were unsure of any effects on Chinese imports. China’s “expected absence” of any significant urea and phosphate exports is likely to continue until August 2026, an industry executive, who asked to remain anonymous, said.
In 2023-24, China provided 2.3 million tons of India’s total DAP imports, while the country’s share of India’s total urea imports of 8 million tons was about 2.2 million tons. Last year, these two categories of China fell to 0.8 million tons and 0.1 million tons, respectively.
