Middle East conflict sparks supply chain anxiety across Asian fertilizer markets

Asia-based fertilizer market participants have been anxiously watching the escalating conflict in the Middle East, with widespread expectation that prices will firm up amid significant supply chain disruptions. The primary concern is the security of passage through the Strait of Hormuz, a critical artery for global trade, sources said March 2.

According to a Singapore-based shipbroker, the shipping market has been experiencing severe disruptions following a coordinated US-Israeli offensive on Iran and Iran's subsequent counterattack. Deteriorating maritime security has driven war-risk insurance costs up by 50% for Gulf transits, leading to a 75% reduction in shipping traffic through the Strait of Hormuz. Some shipping companies have temporarily suspended routes through it.

This disruption has affected various fertilizer markets in Asia.

Nitrogen markets on high alert

The global nitrogen market has remained on high alert on March 2.

In the ammonia market, concerns over cargoes transiting the Strait of Hormuz have sparked a surge in inquiries for material from China and Southeast Asia, with buying interest heard from Northeast Asia, India, and west of Suez.

A buyer noted that nitrogen offers in Southeast Asia have already risen by $20/metric ton to the $460-$470/mt FOB range, though most were cautiously assessing the situation's longevity.

For urea, a China-based source warned that a prolonged conflict could tighten global supply, given the Middle East's role as a key export hub. However, another China-based supplier noted that domestic prices have remained stable so far.

In the ammonium sulfate market, Chinese factories along the Yangtze River have halted their offers, with one trader pausing all offers to "await clarity on market direction."

Phosphates, potash disrupted trade flows

In the phosphates market, the conflict has disrupted trade flows.

Japan-based buyers seeking diammonium phosphate from Jordan noticed tighter ship availability and higher shipping insurance premiums. Traders anticipated that Southeast Asian prices, particularly in Thailand, would rise in the coming days.

This concern was amplified as Thailand-based buyers, already dealing with China's absence from the export market, grew anxious about their DAP supply from Saudi Arabia and began seeking alternatives, with market sources expecting a sharp increase in freight rates for DAP cargoes into Asia, which would inevitably push CFR prices higher.

Similarly, for potash, a China-based trader expected Southeast Asian prices to be affected in the near term, as the region's reliance on imports from Jordan and Israel could lead to tighter supply. The conflict could also influence the yet-to-be-finalized annual MOP contract with India, though an India-based trader described their approach to the situation as "wait-and-see."

Sulfur, sulfuric acid

The Asian sulfur market has already been impacted, as China's domestic Zhenjiang port price has risen by approximately Yuan 135/mt to Yuan 4,260/mt since Feb. 27.

Reflecting the volatility, no firm CFR offers have been reported.

The knock-on effect on the sulfuric acid market is also a key concern, particularly as China is a major importer of sulfur from the Middle East.

An Asian trader noted that the conflict will disrupt sulfur supply and shipments, while tighter Chinese export policies on sulfuric acid could further strain the market. As one supplier summarized the prevailing sentiment, "We need to observe how the situation unfolds and wait for immediate tensions to ease before making any decisions."