Explainer-How does the Iran war affect fertiliser supplies, prices and food security?
Written by: May Angel and Tristan Veyet
LONDON, March 16 (Reuters) – As the U.S.-Israeli war with Iran enters its third week, analysts warn it will seriously disrupt fertilizer markets and jeopardize the food security of developing countries in the near term.
Here’s how conflict affects fertilizer costs, trade flows and production:
WHY IS HORUZ BOGAS THE KEY TO FERTILIZER SUPPLY?
Fertilizer production is an energy-intensive process and relies heavily on natural gas as a feedstock, with energy accounting for 70% of production costs.
As a result, most of the world’s fertilizer is produced in the Middle East, and a third of global trade passes through the Strait of Hormuz, a narrow shipping lane along the Iranian coast that has been largely closed since the start of the conflict.
About 20 percent of the world’s oil and liquefied natural gas also passes through the Bosphorus, and the near closure of the Bosphorus, combined with missile and drone attacks on the Gulf, has forced regional energy facilities to halt production.
That led to the closure of fertilizer plants in the Gulf and beyond, leaving little room for delays, just as farmers in the Northern Hemisphere were preparing for spring planting.
WHY ARE FERTILIZERS CRITICAL TO FOOD SAFETY?
About half of the world’s food is grown using fertilizer, so long-term supply disruptions could have major impacts on food availability, according to Argus analyst Marina Simonova.
In some countries, fertilizers account for up to 50 percent of the cost of grain production, and the UN’s food agency has warned that many low-income countries were already suffering from food insecurity before the war.
The most important fertilizers in the final stretch are nitrogen-based products such as urea because, in general, if a farmer does not apply them throughout a season, yields will likely decrease. This is less the case with other important products such as phosphate and potassium based products.
The global urea market was already grappling with supply shortages before the current conflict, as Europe cut production due to the loss of cheap Russian natural gas and China restricted exports of fertilizers, including urea, to guarantee domestic supplies.
IN WHICH FERTILIZER FACILITIES WAS PRODUCTION STOPPED OR CUT?
Qatar Energy has halted production at the world’s largest urea facility after halting gas production following attacks on LNG facilities.
In India, a huge global urea market, three urea plants have cut production due to reduced LNG supplies from Qatar.
India, home to almost a fifth of the world’s population, buys more than 40% of its urea and phosphate fertilizers from the Middle East and recently agreed to buy 1.3 million tonnes of urea, some of which may not arrive on time.
