Why Reopening the Strait of Hormuz Won't Fix India's Fertiliser Crisis Fast

While a tentative US-Iran peace agreement offers hope for the reopening of the Strait of Hormuz, the relief for the global fertiliser market remains months away. Industry experts warn that the supply chain disruptions caused by the West Asian conflict will take significantly longer to resolve than the immediate reopening of shipping lanes.

The Lag in Production Recovery

The expected reopening of the Strait of Hormuz, triggered by a potential US-Iran interim agreement, is a positive sign for global energy markets. However, fertiliser manufacturers are cautioned that "reopening a lane does not instantly clear stranded cargo." Even if traffic returns to pre-war levels within 30 days, the industry faces a massive backlog.

Industry executives highlight that the recovery process involves more than just opening gates. Refineries and gas-processing facilities must undergo rigorous safety inspections, maintenance checks, and staff mobilisation before they can return to full capacity. Furthermore, shipping companies are expected to remain cautious, leading to potential delays in insurance approvals and berthing schedules at major ports.

Ammonia Stability vs. The Sulphur Crisis

The impact on specific fertiliser inputs will be uneven. Ammonia, a critical component for Di-Ammonium Phosphate (DAP) production, is expected to see price stabilisation within one to two months as gas plants in Qatar return to normal operations. Currently, imported ammonia is available in the domestic Indian market to prevent immediate shortages.

The real concern, however, is sulphur. As a key raw material for DAP and a by-product of petroleum refining, sulphur prices have surged to record highs due to supply disruptions and intense industrial demand. Wholesale sulphur prices are currently fluctuating between $815 and $1,200 per metric tonne. Executives warn that these prices could rise further before any easing occurs, likely not seeing a downward trend until December.

Impact on India’s Agricultural Supplies

For the Indian agricultural sector, the situation presents a mixed bag. While India maintains adequate urea stocks for the ongoing Kharif season, the supply of DAP remains under significant pressure. The global sulphur shortage directly impacts the cost and availability of DAP, which is essential for Indian farmers.

Because many fertiliser raw materials are petroleum derivatives, the entire sector is tied to the pace of oil refinery operations. Until refineries resume full-scale production and the logistical "queue" of vessels clears, the volatility in fertiliser prices is expected to persist for at least another three to four months.

Key Takeaways