The global fertilizer industry is facing difficulties.

Fertilizer companies are having to cut production due to tight sulfur supplies. Crop yields in many countries are facing declines as farmers are forced to limit the use of phosphate fertilizers.

Fertilizer companies worldwide are having to cut production of one of the most essential nutrients for crops, mainly due to the Middle East conflict disrupting supply chains and increasing concerns about future food shortages, according to the Financial Times .

Disruptions to maritime transport in the Strait of Hormuz have a significant impact on the global supply of sulfur – an essential element for the production of phosphate fertilizers, a commonly used fertilizer for crops such as corn, soybeans, rice, and oil palm.

Faris Derrij, CEO of OCP Nutricrops, a subsidiary of OCP Group and the world's largest exporter of phosphate fertilizers, said that the instability in the Strait of Hormuz initially started as a raw material issue, but has now turned into a fertilizer supply shock.

Before the conflict with Iran broke out in late February, approximately 50% of the world's commercial sulfur was transported through this strait.

Phosphorus is one of the three key macronutrients, alongside nitrogen and potassium.

The market for phosphate fertilizers was already experiencing shortages before the Middle East conflict broke out due to increased sulfur demand from various industries such as metal processing and battery manufacturing.

Chris Lawson, Vice President of Market Information and Valuation at consulting firm CRU, noted that the supply of phosphate fertilizer is currently very sluggish. All key sources of phosphate fertilizer are under pressure simultaneously.

Mosaic, one of the world's largest fertilizer manufacturers, headquartered in the US, has had to cut phosphate fertilizer production in Brazil and the US after a sharp increase in sulfur costs negatively impacted the company's profits.

OCP Group also reduced production by moving up maintenance schedules at some plants, although CEO Faris Derrij said the company always maintains "strategic inventories, for both sulfur and finished products." These inventories allow the company to maintain production until the end of July or longer.

To cope with the tight supply situation, China has temporarily suspended exports of phosphate fertilizer until at least August of this year.

Importing countries are racing to secure supplies before the situation worsens. India recently opened a tender for 1.6 million tons of phosphate fertilizer, including 1.3 million tons of DAP (diammonium phosphate) – the world's most widely used fertilizer – marking a record tender volume for a single package.

Saudi Arabian producers, such as Ma'aden and Sabic, are striving to maintain export flows by transporting goods overland to ports on the Red Sea. However, according to data from CRU Group, a commodity market research firm, shipments from Saudi Arabia have decreased by about half due to disruptions around the Strait of Hormuz.

Christian Wendel, chairman of fertilizer trading firm Hexagon Group, said the problem was simply a lack of sulfur. Sulfur prices – which were trading at $150-180 per ton a year ago – have risen to $850-900 per ton, with some shipments even reaching $1,000 per ton.

Willis Thomas, head of fertilizers at CRU, noted that even if phosphate fertilizer producers could procure sulfur, the economic viability of importing it at such high prices would be "ineffective." In China today, the profit margin for phosphate fertilizers is negative just from these raw materials alone – and that figure doesn't even include processing costs.

The disruption to the fertilizer industry initially focused on widely used nitrogen (N) products such as urea and ammonia. Approximately 30% of ammonia was transported through the Strait of Hormuz before the conflict.

However, analysts warn that even if the strait reopens "tomorrow," the phosphate market will still take longer to recover due to its greater geographical concentration and heavy reliance on sulfur flows from the Gulf.

Morocco and Western Sahara hold the majority of the world's phosphate rock (natural phosphorus), which is processed with sulfuric acid to produce fertilizers.

Scarcity is driving a trend toward producing fertilizers that require less sulfur and ammonia, such as TSP phosphate.

OCP Group said it expanded its TSP phosphate fertilizer production several years before the Middle East conflict erupted as part of a strategy to promote the use of more customized fertilizer blends. The group is also seeking alternative sulfur sources, including pyrite and pyrrhotite, which are byproducts of metal processing.

Chris Vlachopoulos, phosphates editor at commodity research firm ICIS, warns that the fertilizer market is split in two. While wealthier countries can secure supplies, poorer nations risk being excluded from the market due to excessively high prices.

According to Mr. Vlachopoulos, the traditional functioning of the market is gradually breaking down. Farmers, especially in poor agricultural regions of sub-Saharan Africa and Southeast Asia, are delaying fertilizer purchases or being forced to reduce the amount of phosphorus fertilizer applied to their crops due to excessively high prices. This will lead to reduced crop yields.

According to Christian Wendel, chairman of the fertilizer trading group Hexagon Group, the consequences of this could negatively impact crop yields and food production as early as next year.

Quang Trung

Source: https://baoninhbinh.org.vn/nganh-phan-bon-the-gioi-gap-kho-260528142536096.html