Closure of the Strait of Hormuz Triggers Global Fertiliser Crisis, Threatens World Food Security
REPUBLIKA.CO.ID, JAKARTA — The effective closure of the Strait of Hormuz has sent shockwaves through the global energy market. Beyond that, its effects are also impacting fertiliser supplies amid rising costs that threaten farmers’ production schedules and world food supply security.
The ongoing armed conflict in the Middle East, which began on 28 February when the US and Israel launched joint strikes against Iran, has triggered a domino effect on agricultural input costs.
Regional tensions in the Middle East have continued to escalate since the start of the US-Israel attacks on Iran. Tehran retaliated with drone and missile strikes targeting Israel, as well as Jordan, Iraq, and Gulf states hosting US military assets. These attacks have caused casualties, infrastructure damage, and disruptions to global markets and the aviation sector.
Tehran also controls the Strait of Hormuz, a crucial waterway for the global distribution of energy and other supplies to much of Asia.
Disruptions to supply chains for fertilisers and energy in the region have halted vital trade routes for global agriculture, triggering risks of a food crisis even deeper than in 2022 when the Russia-Ukraine war began.
The near halt of shipping traffic through the Strait of Hormuz has disrupted 38% of global nitrate-based fertiliser supplies and 20% of phosphate-based fertiliser supplies, posing direct risks to food security for farmers worldwide.
The crisis unfolding in the Middle East, a key global hub for fertiliser and energy supplies, is worsening daily, according to data from analysis firms Kpler and CRU.
The closure of the Strait of Hormuz has caused a 33% contraction in the global fertiliser supply chain, while exports of urea from the region, amounting to 22 million tonnes per year, have stopped. Around 46% of global urea supplies come from the Gulf region, so the halt in exports is exacerbating the crisis further.
About half of more than 2.1 million tonnes of urea stocks from the past two years cannot be loaded onto ships due to logistical disruptions. This shipping backlog could lead to crop failures amid the global harvest season, according to experts.
The sustainability of modern agricultural production heavily relies on supplies of more than 190 million tonnes of plant nutrient products used worldwide each year, according to the UN Food and Agriculture Organisation (FAO).
Most of these supplies consist of 110 million tonnes of nitrogen fertilisers. However, under current conditions, this type of fertiliser is the most vulnerable to geopolitical crises due to its high dependence on natural gas as a raw material.
Fluctuations in energy prices are placing the largest segment of the global fertiliser market under pressure from high costs.
In addition to nitrogen-based fertilisers, the two other main products are phosphorus-based and potassium-based fertilisers, contributing 45 million tonnes and 40 million tonnes respectively.
Experts state that even minor disruptions in the supply chains of these three main agricultural inputs can cause a decline in global crop production that is difficult to recover from.
The Strait of Hormuz is not just an energy route but also the world’s most important transportation route for strategic raw materials such as urea and ammonia.
Saudi Arabia, Qatar, the United Arab Emirates, and Bahrain are major global suppliers of nitrogen fertilisers, along with Iran.
Entering the planting season in the northern hemisphere, disruptions to shipping routes could impact agricultural productivity and food supplies.
Meanwhile, natural gas prices, which account for about 80% of nitrogen fertiliser production costs, have surged sharply, forcing several major facilities to halt operations.
Urea and ammonia prices have seen significant increases following the closure of the route. Urea prices rose from $482.5 per tonne on 27 February to $720 per tonne in mid-March, an increase of around 50%.
Ammonia prices in the Middle East have also risen 24% to nearly $600 per tonne.
Global supply security is now threatened by military strikes on regional energy infrastructure and repeated force majeure declarations by energy companies.