Strait closure hits urea flows feeding half the world.
ISLAMABAD:
Disruptions to shipping through the Strait of Hormuz have triggered a sharp shock in global fertilizer markets, raising concerns over crop production and food prices across South Asia, Africa, and the Americas. The supply squeeze has created particular risks for Pakistan, which relies on both imported fertilizers and natural gas-linked feedstock for domestic production.
The 21-mile-wide maritime corridor is one of the world’s most critical trade routes. Roughly 30 percent of global fertilizer trade and about 20 percent of liquefied natural gas shipments normally pass through the strait. LNG is a key input for nitrogen fertilizer production, meaning disruptions affect both direct fertilizer flows and the gas supply required for manufacturing, said business leader and former Islamabad Chamber of Commerce president Shahid Rasheed Butt.
He added that exposure is even higher for certain commodities. Around half of globally traded sulfur, about one-third of internationally traded urea, and nearly a quarter of ammonia exports originate from Gulf producers, which are widely used for wheat, rice, maize, and other staple crops.
Butt noted that prices have already reacted sharply. International urea prices have risen from about 482 dollars per tonne to nearly 720 dollars per tonne, while ammonia prices have increased by around 24 percent to close to 600 dollars per tonne. He warned that prolonged disruption could push prices further upward as buyers compete for limited cargoes.
Fertilizer plants have also been shut in several countries, including Qatar, India, and Bangladesh. In Pakistan, ahead of the Kharif sowing season, one major company has halted production while several others have initiated emergency planning.
The Gulf region typically accounts for about 20 percent of global seaborne fertilizer exports and nearly 46 percent of internationally traded urea. Unlike oil markets, the fertilizer sector has no strategic reserve system and operates largely on a just-in-time logistics model, leaving limited buffers against sudden shipping disruptions.
Shahid Rasheed Butt warned that sustained high input costs could reduce crop yields and push food prices higher if supply constraints persist. He urged policymakers to accelerate procurement and consider targeted price stabilization measures.
Policymakers now face the dual challenge of securing fertilizer supplies while managing fiscal pressures under the ongoing IMF stabilization program.
