The Aryavarth Express:
New Delhi: The effective closure of the Strait of Hormuz is expected to create a major logistics and input-cost shock for India’s fertilizer sector, though immediate supply shortages are unlikely, according to a report by DAM Capital.
The report noted that the current disruption is more of a cost and supply-chain challenge rather than an availability crisis, especially as the industry is in a relatively low-demand phase ahead of the Kharif season, when fertilizer demand typically rises from mid-May.
Among fertilizers, Di-Ammonium Phosphate (DAP) is seen as the most vulnerable due to its heavy dependence on imports and exposure to global supply chains. While India sources a significant portion from Middle Eastern countries, including Saudi Arabia, these supplies are directly affected by disruptions in the Hormuz route.
The situation is further complicated by shifting global dynamics, with China no longer serving as a reliable backup supplier. China is reportedly restricting fertilizer exports to stabilize domestic prices and ensure adequate supply for its own agricultural needs, forcing Indian buyers to turn to more distant markets such as Morocco and Jordan, often at higher costs.
The report also highlighted concerns in the urea segment, where risks are tied more to the availability of natural gas than finished imports. Reduced supplies of liquefied natural gas (LNG) are already impacting production, pushing some plants toward lower output or scheduled maintenance.
Citing Ramesh Chand from the National Centre for Agricultural Economics and Policy Research, the report estimates that India will need around 18 million tonnes of urea by August 2026. With current stockpiles at 6.2 million tonnes and expected domestic production of 10 million tonnes over the next five months, an estimated shortfall of about 2 million tonnes will need to be met through imports.
Overall, the sector is expected to face a “managed supply squeeze” rather than a complete shortage. Prolonged disruption could lead to higher import costs, pressure on government subsidies, tighter sourcing options, and more cautious inventory management by companies.
While producers of complex fertilizers like NPK and SSP are relatively better positioned for now due to stronger inventory buffers, they may still feel the impact of rising upstream costs.
The report added that export restrictions from key global suppliers are likely to keep international fertilizer prices elevated. Although companies may benefit in the short term by selling existing inventory at higher prices, these gains are expected to be offset by increased costs when replenishing stocks if the crisis in the Hormuz region persists.
