The closed Strait of Hormuz has created a major fertilizer shock and threatens food security in developing nations as sulfur and phosphate exporters from the Middle East struggle to ship supply to the global markets.
Since the Iran war began, supply from the Middle East has crashed, forcing fertilizer producers to reduce output and leading to major price spikes in these markets.
SABIC and Ma’aden, two Saudi chemicals giants, have tried to re-route part of their shipments from the ports on the Red Sea that do not need the Strait of Hormuz to ship cargoes to international markets. Even so, supply from Saudi Arabia has crashed by half, analysts and industry experts told the Financial Times.
Other producers in the Middle East are unable to ship sulfur and phosphates at all, due to the Strait of Hormuz crisis, leaving the global fertilizer markets in shortage of key products for crops.
Analysts fear that farmers’ yields in many developing economies will be low this year, threatening the food security of countries already grappling with shortages.
OCP Group, the biggest phosphate exporter globally, is already warning of a fertilizer supply shock.
“This situation around Hormuz was in the beginning a raw material problem that has turned into a fertiliser supply shock,” Faris Derrij, chief executive of OCP Nutricrops, told FT.
The shock from the Strait of Hormuz blockage extends well beyond oil and gas flows. It threatens other major industries including fertilizer, plastics, and technology.
The naphtha, ammonia, urea, and helium supply that the Middle East would typically export via the most critical energy chokepoint is now trapped in the Persian Gulf.
We are now in the 13th week of the war, the Strait of Hormuz is still de facto closed, and supply chains are reeling from the shock of slashed crude, naphtha, LNG, LPG, fertilizer, ammonia, urea, and helium supply.
By Charles Kennedy for Oilprice.com
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