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

While a tentative US-Iran peace agreement signals the potential reopening of the vital Strait of Hormuz, the relief for the global fertiliser market remains months away. Industry experts warn that supply chains and production levels are too deeply disrupted to see an immediate return to normalcy.

The Lag Between Reopening and Production Recovery

The expected reopening of the Strait of Hormuz, a critical artery for global energy, is a positive step, but it is not a magic wand for the fertiliser sector. Industry executives note that the first sign of relief will likely come from the restoration of natural gas supplies, but there is a significant time lag involved.

Restarting gas plants and bringing production back to standard levels is a complex process that cannot happen overnight. Furthermore, because many fertiliser raw materials are petroleum derivatives, the market will only stabilize once oil refineries resume full-scale operations. This suggests that even if the waterway opens, the "trickle-down" effect on fertiliser availability may take three to four months to materialize.

Ammonia vs. Sulphur: A Tale of Two Inputs

The impact of the geopolitical shift will be felt unevenly across different fertiliser inputs. Ammonia, a critical component for Di-Ammonium Phosphate (DAP) production, is expected to see prices stabilize within one to two months as gas plants in Qatar return to normal operations. Currently, imported ammonia is available to meet domestic demand, providing a temporary buffer.

However, sulphur remains a major pain point for the industry. As a byproduct of petroleum refining and a key ingredient for DAP, sulphur prices have surged to record highs due to West Asian supply disruptions. Wholesale sulphur prices are currently fluctuating between $815 and $1,200 per metric tonne. Experts warn that these prices could rise even further before they begin to ease toward December, posing a continued threat to DAP supply stability.

Logistics and the "Queue" Problem

Even if the physical shipping lanes are cleared, the logistical nightmare is far from over. Reopening a strategic waterway does not instantly resolve the backlog of stranded cargo. Industry executives highlight a looming "queue" of vessels that will face port congestion, delayed berthing, and extended inspection periods.

Refineries and gas-processing facilities must also undergo rigorous safety inspections, maintenance checks, and staff mobilization before reaching full capacity. Additionally, shipping companies are expected to maintain a cautious stance, which may slow the pace of full operational restoration through the Strait.

Impact on the Indian Market

For Indian farmers and agribusinesses, the outlook is mixed. While India currently holds adequate urea stocks for the ongoing Kharif season, the supply of DAP continues to face intense pressure. The combination of high sulphur costs and shipping delays means that the cost and availability of DAP will remain volatile in the short term, despite the diplomatic progress in the Middle East.

Key Takeaways