By Binoy Kampmark
The closure of virtually all commercial traffic through the Strait of Hormuz occasioned by the Iran War is not merely a matter of oil and gas, the usual prized duo that feature in the nervous chatter of global markets. There are other less conspicuous products that have also been snared in the process. Consider fertilisers, with a supply shock that may well push prices beyond the 2022 peak following the Russian invasion of Ukraine. Given their role in agriculture, another, less publicised shock arising from this prolonged war is in the offing. Prices, at this writing, are already biting. Egyptian urea prices have risen by 25%, reaching $625 per metric tonne, up from $484 to $490 between February 17 and February 23.
The North Dakota State University’s Agricultural Trade Monitor may not make scintillating reading, but it is of sufficient interest to note that the Gulf accounts for some 43% of seaborne urea exports, approximately 44% of seaborne sulphur, over a quarter of traded ammonia and far from negligible quantities of phosphates. The effect of the illegal war commenced by the US and Israel on February 28 had immediate effects. “Within the first week of the crisis, major Gulf producers began declaring force majeure and reducing operations across urea, ammonia, and sulfur.”
In their March report, the authors note that, unlike 2022, when Russian fertilizers were rerouted, “limited alternative routes” present themselves with a closed Strait. Risks for the US could be identified in urea, MAP (Mono-Ammonium Phosphate), and DAP (Di-Ammonium Phosphate) fertilizers.
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